Preamble

The House met at Eleven o'clock

MR. SPEAKER'S ABSENCE

The House being met, the Clerk at the Table informed the House of the absence from this day's sitting of Mr. SPEAKER, pursuant to leave given on Monday 18th July.

Whereupon Mr. OSCAR MURTON, The CHAIRMAN OF WAYS AND MEANS, proceeded to the Table and, after Prayers, took the Chair as DEPUTY SPEAKER,pursuant to the Standing Order.

THE HON. MEMBER FOR BOURNEMOUTH, EAST

Mr. Deputy Speaker (Mr. Oscar Murton): Mr. John Cordle—personal explanation.

Mr. Cordle: Mr. Deputy Speaker, I have now had an opportunity of giving further onsideration not only to the Report of the Select Committee on the Conduct of Members but to my own position and that of my constituents as it is affected by the report.
I have decided on reflection, and as a parliamentarian of nearly 20 years' experience, that if a group of my colleagues decide unanimously that I was at fault in a matter, I must bow to their judgment. It was not my view at the time that I was doing anything that I should not have done. In such matters one can only consult one's own conscience, and mine at the time was clear, but my colleagues do not accept this view and I must now accept theirs.
In the light of this conclusion, and as one whose first duty must be to my colleagues and to the reputation of the House, I am bound to consider the circums0tances of the forthcoming debate on the report. It may well be acrimonious and divisive. My greatest concern is that the good name of the House should not suffer in the process.
I have therefore decided that the only proper course for me to take is to resign my seat, and I propose immediately after

I have left the Chamber to apply for one of the appropriate offices. I shall therefore no longer be a Member of the House.

EUROPEAN COMMUNITY (COUNCIL OF AGRICULTURE MINISTERS)

11.7 a.m.

The Minister of Agriculture, Fisheries and Food (Mr. John Silkin): With permission, Mr. Deputy Speaker, I would like to report to the House on the outcome of the Council of Ministers (Agriculture) on 18th-19th July, at which I was accompanied by my right hon. Friend the Secretary of State for Scotland for the discussions on fisheries and by my hon. Friend the Parliamentary Secretary for those on agriculture.
On the future common fisheries policy the Commission rejected the United Kingdom case for extended exclusive zones for the firshemen of costal member States. We warned that unless there was agreement on an exclusive zone of 12 miles with a dominant preference for our firshermen within the zone from 12 to 50 miles we would return to our original demand for an exclusive zone of up to 50 miles. We also re-emphasised our right to take unilateral conservation measures where appropriate. The discussion will be resumed in October. I must frankly say to the House that the Commission's attitude at this meeting was disappointing.
It was agreed that a Community ban should be reimposed on fishing for herring in the North Sea. This will replace the United Kingdom national meaures which we imposed in our own waters following the failure of the Council on 27th June to reach agreement. This Community ban will extend until the end of September and will be discussed further at the September Council. The Government are determined that it will continue thereafter.
Satisfactory quotas for 1977 for the West of Scotland herring stock, provisionally agreed at the June Council, will now come into operation very soon.
The Council agreed to reimpose from 1st September until 15th October the ban on fishing for Norway pout in the area of the North Sea in which such a ban had operated until the end of March.
The Council discussed a proposal from the Commission that the cif price for New Zealand butter and cheese imported under Protocol 18 of the Treaty of Accession should be increased by 10 per cent. In view of the length of time since the previous increase, we stressed that an early decision was needed. It was agreed that a definitive decision would be taken at the Council's next meeting in September after the necessary scrutiny of the figures at official level.
On the labelling of milk products we have reached agreement that, contrary to the earlier proposal, the terms "dairy ice cream" and "ice cream" which are now used in the United Kingdom should continue unchanged. However, some relatively minor technical points remain unsolved, and the draft regulation will be considered again in September.
We again emphasised the need for a change in the method of calculation of monetary compensatory amounts on pig-meat.

Mr. Jopling: We are grateful to the Minister for coming here on what is a sad day but a day that will be remembered as one on which it has been shown that honour is still a feature of public life in this country.
We welcome the Minister's announce-meant about the ban on industrial fishing for herring and the ban on herring fishing in the North Sea. Is the Minister confident that the ban will extend beyond September? Has he taken note of the effect of this ban, together with the greatly reduced opportunities for our distant and middle water fleets, on our remaining inshore waters? Is he aware of the likely pressure on North Sea stocks of whiting and haddock and on stocks of mackerel on the South Coast? Is he aware that South-West waters are likely to look like the Serpentine on a Saturday afternoon, with the possibility of more than twice the estimated sustainable catch of 240,000 tonnes being taken out by British vessels alone? Has he anything planned to preserve these stocks, such as a ban on purse seining?
The Minister is belatedly pursuing the interests of our beleaguered pig industry. Will he confirm that the price demanded for New Zealand cheese has increased by 28 per cent. and for butter by 24 per cent.? Do not these demands show how

dangerous it is to speak of masses of cheap food available round the world?
I should like to comment on the way in which the Minister has conducted the negotiations this week and in previous months. We have not been in on the negotiations so it is difficult for us to join in the attacks on the Minister. We have read about attacks on his manner and attitude and their damaging effects on the British interest. The attacks have come from certain Commissioners and knowledgeable journalists. They are summed up in the July edition of Green Europe, which hon. Members who protest about the attacks might like to study.
Will the Minister spend the summer pondering whether his approach has been influenced by his anti-European instincts and whether that is the right approach? Will he remember that he is negotiating not for a small group but for Britain?

Mr. Silkin: I shall answer the detailed questions rather than deal with the polemics of the hon. Member for Westmorland (Mr. Jopling). It is our intention to ensure that the ban continues beyond September. On a number of occasions I have said clearly to the House that where the Community is unable or unwilling to institute proper conservation measures we shall be forced —and, indeed, we are determined—to introduce our own unilateral measures. There can be no question about that.
I agree that there is great difficulty, particularly for those who must switch from fishing herring to other types of fishing. The hon. Member for Westmorland is correct to point out the difficulties that may occur over the fishing of mackerel. I made the same point a few weeks ago in a statement to the House. This matter, like purse seining and beam trawling, is under constant review.
I am sorry that the hon. Member thinks that my assistance to the pig industry is belated. I seem to recall introducing unilateral aid for pig farmers. Let me remind the hon. Member exactly how much that aid was. Before I was stopped, it amounted to £17 million. I do not regard that as either belated or insignificant.
I do not accept what the hon. Member said about butter and cheese. The present New Zealand cif price is 46 per cent. of the common intervention price. With the


increase suggested, it should go up to the princely percentage of 51 per cent. That does not strike me as an illustration of very dear food coming in. The reverse is true. In the period since the last New Zealand increase in price no fewer than three increases in the common intervention price have occurred—in April 1976, September 1976 and as recently as May 1977.
The question of attacks was dealt with a long time ago by Abraham Lincoln. He said that if he were to reply, let alone read, all the attacks made on him the shop might well be closed for any other business. He said that he did the best he could and that he meant to go on doing it to the end.

Mr. Jay: Do not the offensive remarks of the hon. Member for Westmorland (Mr. Jopling) come ill from a member of a party which got us into this situation?
Does my right hon. Friend recall that last winter we were promised that we would obtain at least some concession in Icelandic fishing waters? Is it not clear that since we handed the negotiations over to the skills of the Commission absolutely nothing has happened?

Mr. Silkin: I am glad to see my right hon. Friend the Member for Battersea, North (Mr. Jay) back in his place. I wish him well. I do not pretend to be a psychologist or a psychiatrist and I cannot, therefore, analyse the motives of Opposition Members. I do not regard the Commission's negotiations over Iceland as one of the great success stories of our time.

Mr. Powell: Is it not the case that in the Council of Ministers the right hon. Gentleman is representing the interests of the United Kingdom as a whole, and that canting references to the standard of public life from the so-called Conservatives on the Opposition Front Bench are no substitute for the maintenance and defence of the national interests of this country? Is it not true that the Council proved unwilling to consider even a 12-mile exclusive coastal belt—an ill omen for the likelihood of a reasonable settlement to cover the minimum requirements of this country? If the Minister finds it necessary to revert to this country's previous proposition, will he make it

a requirement for a 50-mile limit as such, without qualification?

Mr. Silkin: I am grateful for what the right hon. Member for Down, South (Mr. Powell) has said. I am dominated by the right to advocate United Kingdom interests. That is what I assume I am here for, and nothing else. I have been asked about my general attitude to fishing limits. I hope that I have said frankly to the House, on the last two occasions particularly, that it seemed to me that we had to say that we were prepared to be flexible if other members of the Community were. However, if they were not, we must reserve our rights. On that basis I stand.

Mr. Grimond: Perhaps it would be in order to utter a word of appreciation and sympathy for our colleague who has left us.
The Minister has made an extremely serious statement. Is he aware that we still need a 50-mile limit and that a proposal for a 12-mile limit with dominant preference does not meet the needs of the industry? Is he aware that if he resists the present proposals he will have the wholehearted support of hon. Members of my party and of the industry in taking a tough line in the autumn?
I do not complain about the herring ban, but it will have a peculiar and disastrous effect in Shetland, because the processers cannot get any herring from the West Coast and they will go out of business. Will the Minister consider paying compensation or operating a small quota system so that these local people can remain in business?

Mr. Silkin: I am grateful to the right hon. Gentleman, and I reiterate the first remark that he made, which was not connected with my statement.
As to the question of the 50 miles, 1 want to make it clear that it is not a dominant preference for 12 miles. It is an exclusive right for 12 miles coupled with a dominant preference, which, on the terms that I reported to the House, gave us a sufficiency of fish and a dominant control. As far as the remainder of the fish was concerned, it seemed to me, doing the sums, that there was enough for others. It was on that basis. It seemed to me that that was a flexible approach. However, I quite agree with the right hon. Gentleman that if we were reasonable and


others were not prepared to be, it would be time to consider our own position. It is certainly that pondering which the hon. Member for Westmorland (Mr Jopling) asked me to do—perhaps the right hon. Gentleman will remember—that I shall spend my time doing during the summer.
As to the question of the right hon. Gentleman's constituents, I fully understand the difficulties. I have a great deal of sympathy with them in this regard. I am afraid that I do not agree with the idea of quotas, because we are really faced with the possible extinction of the herring stock, and that I am not prepared to countenance.
As to the other points that the right hon. Gentleman made, I shall certainly discuss them with my right. hon. Friend.

Mrs. Dunwoody: Is my right hon. Friend aware that he has the support of not only the Government side of the House but of every sensible person in this country in his defence of British interests? Is he also aware that we are becoming increasingly sick of the squalid attacks of Opposition Members who do not seem to be at all concerned with the interests of the British? Has he ever made an estimate of the man-hours spent by his civil servants and himself, and the cost to the British taxpayer, in considering absolutely stupid regulations, such as the exclusive use of the description "ice cream", which are at present costing a small fortune for no obvious or real reason?

Mr. Silkin: Such an estimate might itself be rather costly. However, I agree with the general tenor of what my hon. Friend says. The truth of the matter is that absurd bureaucratic regulations of this sort, which in the end—the House should realise this—result in a decision that is not very different from one that we ourselves have been imposing under our own national law for years, are an illustration of what my hon. Friend means.

Mr. Donald Stewart: Is the right hon. Gentleman aware that his manner and attitude in these negotiations has the full approval of my hon. Friends and myself? [Interruption.] I may say in passing that it is very odd that opponents of Scottish independence should be so keen on throwing away the independence of their own country.
On the question of conservation, will the right hon. Gentleman bear in mind the two vessels in my fleet, and possibly some others in other parts of the country, which fish for herring by drift net only and which, by the nature of their operations, are conservationists and have been all along'? Will he keep that type of vessel in mind?

Mr. Silkin: In the interests of brevity —because I did not think that the House wanted a long report—I omitted rather detailed points. However, the right hon. Gentleman's question is very important. I can tell him that I raised this question relating not only to his two small fishing vessels but to small fishing vessels fishing really small amounts of fish, in Ireland, for example, and other parts of the Community, and I shall continue to press the matter.

Mr. Jim Spicer: The Minister has made clear that he is fully aware of the threat faced by the mackerel industry in the South-West. He must also be aware that trawlers in the North-East and in Scotland are fitting out for the sole purpose of moving into the waters of the South-West. Will he give an undertaking that if this move takes place he will examine very quickly the possibility of giving absolute priority to the West Country fishermen in those waters, who depend for their sole means of livelihood on the existence of mackerel in those areas?

Mr. Silkin: Yes, Sir, but the question of getting a proper balance of such fishing within our own waters depends upon our asserting our rights to have the exclusive control of those waters.

Mr. John Ellis: Did my right hon. Friend note the muted support that he received when he made his announcement on fishing, and the comments made by Opposition Members, and then the Opposition Front Bench attacking him on the principle of his being a bad European? It is they who put him in the straitjacket and then cavil when he stands up for this country. As such, they should be dismissed.
On a serious note, will the prospective increase in the price of butter have any effect on the price to the British consumer?

Mr. Silkin: This is a very important point and I have to make it absolutely clear to the House. The increase in New Zealand prices proposed, as I have said, only brings them up to 51 per cent. of the common intervention price anyway. The effect in the shops of this country and, therefore, to British housewives would be nil, as a result of a reduction in levies, and this has always been, as my hon. Friend knows, part of our policy.

Mr. Temple-Morris: Does the right hon. Gentleman fully realise—this is not the purport of my original question, but I am driven to it by Labour Members—that we need things out of the Common Market and that it is Government policy to remain in the Common Market, not least concerning the reform of the common agricultural policy? Unless we go in as Europeans, that policy will never be reformed.
I add to that my original question. What is to happen if anything, about marketing boards for milk and potatoes? That is another question on which we need progress.

Mr. Silkin: I suppose that there are two methods of trying to obtain United Kingdom interests. One is to sit back and do nothing but agree with others. I do not regard that as the correct method. The other is to make very clear what our own interests are and to seek to obtain those, and to point out, sometimes with a certain strength of feeling, if necessary, and, perhaps, even vocabulary, what those interests are.
The hon. Gentleman has given us an example of the marketing boards. I have not the slightest intention of letting any EEC calm relationship get in the way of getting that for ourselves.

Mr. Christopher Price: Is my right hon. Friend aware that to some of us in the European Assembly his forthright style in these matters appears to be in the best interests of not only the United Kingdom but all the eight other countries, because it brings a degree of clarity to situations which otherwise are covered with obfuscation and bumbledom? Is he further aware that the quotation read by the hon. Member for Westmorland (Mr. Jopling) is just part of a paper mountain of drivel produced in Brussels commenting on these things, which is best consigned to the waste-paper basket?
On a particular point, is my right hon. Friend aware that we need to be very worried indeed about the whole future of access of New Zealand products to Britain, because there is a very strong lobby in Europe that would attempt to solve its dairy problems in Europe by trying to exclude, completely and for ever, New Zealand products from Britain, and we have a very special responsibility?

Mr. Silkin: I thank my hon. Friend for the first part of his question. On New Zealand products, I absolutely agree with him. Indeed, it is more than that. It is not only a special duty, it is a special kinship and a special affection. It is our job to see that that is maintained.

Mr. Crouch: Can the right hon. Gentleman offer any hope at all for the big farmers of this country—many of whom are in my constituency—who are rightly disgruntled because some of them who are not mixed farmers but solely pig farmers are going bankrupt and out of business? Parliament is running out of time. Is there any chance that before the Summer Recess the right hon. Gentleman will be able to give some hope to pig farmers, even if it is only something little?

Mr. Silkin: The difficulty, as the hon. Gentleman will appreciate, is that it is not a matter that we can decide by ourselves. It was the solution that I tried to get earlier this year in January, when I knew that the situation had become as difficult as it is. All I can say is that we shall have to keep trying. I would not give any odds on what the final decision of the European Court will be, but that will not be until after the recess, I am afraid.

Mr. Body: I recognise that the Minister is trying to permit continuing access for dairy products from New Zealand, but is he aware that the Australian Prime Minister told an audience in this country recently that no less a proportion than one-third of the dairy farmers of Australia had been driven out of business as a result of our entry to the EEC? Does he think that there is any chance of pressing his friends in the Council of Ministers to accept that it is wicked folly to drive out of business so many thousands of the most efficient farmers in the world, at a time when other people are asserting that there may be a shortage of dairy products or an increase in their price?
Secondly, will the Minister confirm that pigmeat MCAs cannot be adjusted unless all his colleagues on the Council of Ministers unanimously agree to that course of action? Does he believe it likely that those who represent the Danish and Dutch pig producers are likely to agree to his proposal to realign the MCAs so long as they have a glut of pigmeat in their own countries which they want to export over here to the disadvantage of our own pig producers?

Mr. Silkin: On the second question the hon. Gentleman is, of course, absolutely right. My hon. Friend made a very convincing and what I thought was an extremely forceful speech on the question of re-calculation of pigmeat MCAs, and he got some support, notably from Italy. But my Danish colleague was absolutely clear and absolutely resolute. I understand his point of view. He was dealing with Danish national interests.
With regard to the first question, I have decided that my first major tour—Ministers of Agriculture undertake a tour every year—will be to Australia and New Zealand, next month. I intend to continue the discussions that I had with the Australian Prime Minister and the New Zealand Prime Minister very much along the lines that the hon. Member for Holland with Boston (Mr. Body) suggested.

Mr. Nott: Is the Minister aware that there is great concern about mackerel stocks in the South-West, and that there is perhaps not quite as much optimism there as among his advisers about the future of mackerel stocks? What considerations are going on in the Community about conservation in this part of the Community? Is any consideration going on of restrictions on the use of gear and nets, for instance? Will the Minister bring us up to date on the present situation?

Mr. Silkin: My advisers are by no means optimistic. Indeed, nor am I. I told the House on the last occasion, or the time before that, that the herring industry is absolutely threatened and the mackerel fishing might very well follow. There is no optimism about it. On the contrary, we all accept the need to maintain a close watch and promote conservation measures where necessary. The Commission is currently considering a number of conservation measures, very

much on the lines that the hon. Gentleman has put to us, for example, on the size of nets and things like purse seining and such methods of fishing.
The difficulty is always that the Commission makes a proposal and then one has to get the nine member States to agree to that proposal. That is why it is vital that we reserve our national right to introduce conservation measures in our own waters if the Community itself is unwilling or unable to do so.

Mr. Hurd: Does the Minister accept that it is not really good enough to ride off criticisms of his tactics by saying that he is standing up for British interests? [HON. MEMBERS: "0h."] That is not the question. Of course he should stand up for British interests, but the question that he should ask himself is whether the tactics that he chooses are always the right ones to protect national interests. It seems to us that there is clear and overwhelming evidence now that —not always, but on many occasions—the tactics that the Minister chooses are not the ones that best protect national interests. If he wants evidence of that he should consult the scientists at Culham, where a major British interest has apparently suffered because of the Minister's ham-handed tactics on another matter.
Does the Minister accept that what I am saying is intended to be helpful? Opposition Members share his objective, which is often stated, of having a substantial reform of the common agricultural policy. During the summer will he consider whether some revision of his tactics will be required if we are to have any hope of achieving the revision at which he rightly aims?

Mr. Silkin: There are a number of ways in which the United Kingdom is different—in its interests, in its history, and in its politics—from the other eight member States. One difference is that it is the only country in which the Minister, when he stands up for the interests of his own country, is attacked in his own Parliament. I hope that the House and the country will be aware of the direction from which that line of attack comes.
I do not think that I have to justify my own tactics on the basis of whether every single one of them will achieve the successful outcome that one would like. I


believe that that would be a totally childish point of view. What I have to do is to look back and see what has been achieved in the past six months, however small. We are in a straitjacket, as I have always maintained. I have to ask whether those achievements would have been gained if I had adopted any other tactics. My conscience is totally clear about that.

Mr. Mikardo: Arising out of the last question, does my right hon. Friend realise that I for one would be very happy to leave to the judgment of anybody who has heard the exchanges here this morning the question whether it is my right hon. Friend or the Opposition who would be the best judges of how to handle British interests in Europe?

PATENTS BILL [LORDS]

As amended (in the Standing Committee), considered.

New Clause 1

COSTS AND EXPENSES IN PROCEEDINGS BEFORE THE COURT UNDER S. 40

(1) In proceedings before the court under section 40 above (whether on an application or an appeal to the court), the court, in deter- mining whether to award costs or expenses to any party and what costs or expenses to award, shall have regard to all the relevant circumstances, including the financial position of the parties.

(2) If in any such proceedings the Patents Court directs that any costs of one party shall be paid by another party, the court may settle the amount of the costs by fixing a lump sum or may direct that the costs shall be taxed on a scale specified by the court, being a scale of costs prescribed by the Rules of the Supreme Court or by the County Court Rules.'—[Mr. Clinton Davis.]

Brought up, and read the First time.

11.39 a.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis): I beg to move, That the clause be read a Second time.
In Committee the hon. Member for Colne Valley (Mr. Wainwright) moved an amendment that would have had the effect of preventing the award of costs against employees in proceedings pursuant to Clause 40. I indicated at that time that I had a good deal of sympathy with the proposal and that I wanted to consider the matter further, without commitment. I was very much concerned that an employee with a substantial case should not be deprived of the opportunity or be deterred from seeking relief simply because of the costs that he might face at the end of the day.
On the other hand, I think I was right also to make the point that it was necessary to try to avoid giving any encouragement to people to bring forward cases which, although they might not be classified as vexatious or frivolous, might come near to being included in that category. It was in the light of what I said that the hon. Member withdrew his amendment. Since then I have consulted my noble Friend the Lord Chancellor, and the clause is the result of our conclusions.
Perhaps I may now explain the clause. Under subsection (1) the court is enjoined, when awarding costs—or, to use


the Scottish expression, "expenses"—to have regard to all the relevant circumstances, including the financial position of the parties. By virtue of the word "court" in Clause 128(1) this provision will apply to the High Court, the Court of Session, and the High Court in Northern Ireland, As a result, all these courts will be required to have regard to all the relevant circumstances, including the financial position of all the parties, concerning the bringing of the application.
Hon. Members will observe that the subsection could operate in favour of an employer just as it could in favour of an employee, because it is right that all the relevant circumstances should be considered. In fact, in practice it is unlikely to work that way. It is one of the facts of life that employees in this field are almost always economically weaker than their employers. That was the point made in Committee by the hon. Member for Colne Valley, and the clause constitutes an attempt to diminish an unjustifiable deterrent facing a worthy claimant.
Subsection (1) does not refer to the Comptroller. It is unnecessary to do so because, under Clause 106(1), the Comptroller may, in proceedings before him under the Bill, award to any party such costs—or, in Scotland, expenses—as he considers reasonable, and he can direct how and by what parties they are to be paid. It is therefore not necessary to include him in that reference.
Subsection (2) applies only to the Patents Court, and empowers that court, when directing that the costs of one party shall be paid by another party, to settle the amount by fixing a lump sum or, alternatively, to direct that the costs shall be taxed on one of the scales of costs prescribed by the Rules of the Supreme Court or by the County Court Rules. There are, I understand, three such scales in the High Court and five in the county courts. The Patent Court will be able to limit any award of costs in proceedings under Clause 40 by awarding either a lump sum or costs to be taxed on any of the eight scales. In that way the court will be able to effect a moderation in the amount that the unsuccessful party will have to pay, if the circumstances require it.

Mr. Richard Wainwright: The Liberal Party supports the

clause, and 1 am obliged to the Minister for taking the spirit of the amendment that I moved in Committee and clothing it with all the necessary provisions—some thing which, in most cases, only the Government can draft.
I am advised that the clause meets the points that were first put forcefully in the other place by Lord Lloyd of Kilgerran, and that I moved briefly in Committee. The purpose is to ensure not only that the employee inventor shall have the rights that he now has under the Bill, but that those rights shall be enforceable at no extraordinary expense. It is public knowledge that patent legislation can on some occasions be riotously expensive and way above anything that workers or any of the unions could possibly finance.
It is important that this safeguard should be available, so that employee inventors know that they stand a good chance of getting their rights without running appalling financial hazards. Because the clause appears to encapsulate that important point, I am happy to speak in support of it.

Mr. John Nott: The clause is perfectly acceptable to us. We recognise that there is a problem if substantial costs are incurred by employees, and we are therefore happy with the Government's proposal.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 2

MISUSE OF TITLE `PATENT OFFICE'

'If any person uses on his place of business, or on any document issued by him, or otherwise, the words "Patent Office" or any other words suggesting that his place of business is, or is officially connected with, the Patent Office, he shall be liable on summary conviction to a fine not exceeding £500. '.—[Mr. Clinton Davis.)

Brought up, and read the First time.

11.45 a.m.

Mr. Clinton Davis: I beg to move, That the clause be read a Second time.
This clause corresponds to a new clause proposed in Committee by my hon. Friend the Member for Nottingham, West (Mr. English). I promosed to consider the points that he made. It also corresponds


to Section 92(2) of the 1949 Act. Although, as I said in Committee, I do not consider the clause to be necessary for purely domestic matters, we have the new factor of European business.
The point made by my hon. Friend was that some countries permit practitioners to describe their firms as "patent bureaux", and there is a risk that the word "office" might be used in this country in that context. I therefore think that it is right to continue the law as set out in Section 91(2), which is what the clause effectively does.
The penalty of £500 has been fixed after consultation with the Home Office.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

Clause 1

PATENTABLE INVENTIONS

Mr. Clinton Davis: I beg to move Amendment No. 1, in page 2, line 24, leave out 'or immoral' and insert, 'immoral or anti-social'.

Mr. Deputy Speaker (Mr. Oscar Murton): With this we may take Government Amendment No. 8.

Mr. Davis: Amendment No. 1 is a drafting amendment to subsection (4), consequential upon the amendment made in Committee to subsection (3(a)). I am grateful to the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) for pointing out the omission in Committee.
Amendment No. 8 corrects an obvious grammatical error.

Amendment agreed to.

Clause 2

NOVELTY

Mr. Clinton Davis: I beg to move Amendment No. 2, in page 3, line 28, leave out 'of the invention'.

Mr. Deputy Speaker: With this we may take Government Amendment No. 3.

Mr. Davis: These are purely drafting amendments and are consequential upon the deletion of the words "or other pro-

prietor" in Committee. The first amendment removes what are now superfluous words and the second corrects the reference to "either of them", which originally referred back to either the inventor or other proprietor.

Mr. Nott: It is true that these are drafting amendments, but I recall that when we put them forward as such in Committee the Minister was uncertain that this was the correct way of dealing with the matter. I am glad that he has accepted our proposals, and we are happy with what he has suggested.

Amendment agreed to.

Amendment made: No. 3, in page 3, line 30, leave out either of them 'and insert the inventor'.—[Mr. Clinton Davis.]

Clause 5

PRIORITY DATE

Mr. Clinton Davis: I beg to move Amendment No. 4, in page 5, line 20, at end insert—
'(3A) The foregoing provisions of this section shall apply for determining the priority date of an invention for which a patent has been granted as they apply for determining the priority date of an invention to which an application for that patent relates'.
This clause defines the priority date of an invention to which an application relates. The priority date of that invention should clearly be the same after the patent has been granted. Moreover, in cases where the patent has been amended after grant the test to be applied in determining the priority date of an invention which did not appear as such in the application should be the same as the test for determining the priority date of the invention to which the application relates. There was a lacuna in the Bill, and the amendment seeks to cure that.

Amendment agreed to.

Clause 12

DETERMINATION OF QUESTIONS ABOUT ENTITLEMENT TO FOREIGN AND CONVENTION PATENTS, ETC.

Mr. Clinton Davis: I beg to move Amendment No. 5, in page 11, line 5, leave out from 'by' to 'a' in line 7 and insert
'the relevant convention court with respect to'.

Mr.Deputy Speaker: With this we may take Government Amendments Nos. 6and 7.

Mr. Davis: These amendments are of a purely drafting nature and substitute references to the relevant convention court, defined in Clause 128, for specific references to the courts or other authorities concerned.

Amendment agreed to.

Amendment made: No. 6, in page 11, line 19, leave out from before 'to end of line 21 and insert the relevant convention court'.—[Mr. Clinton Davis.]

Mr. Deputy Speaker (Sir Myer Galpern): I call the Minister to move Amendment No. 8 formally.

Mr. Nott: Are you now——

Mr. Deputy Speaker: It has already been discussed, so we cannot debate it now.

Mr. Ian Mikardo: On a point of order, Mr. Deputy Speaker. With respect, that is not the point. You called Amendment No. 6 to be moved formally, but you omitted to call Amendment No. 7. You moved from Amendment No. 6 straight to Amendment No. 8. We should not like to lose Amendment No. 7 on that account.

Mr. Deputy Speaker: It may be the effects of the Adjournment debate at 1 o'clock this morning. I thought that I had called Amendments Nos. 6 and 7 together, to be moved formally. I thought that that was what I said. However, I will put the Question again.

Amendment made: No. 7, in page 11, line 25, leave out from 'or' to 'determines' in line 27 and insert 'the relevant convention court'.—[Mr. Clinton Davis.]

Clause 16

PUBLICATION OF APPLICATION

Amendment made: No. 8, in page 15, line 27, leave out first 'or'.—[Mr. Clinton Davis.]

Clause 22

INFORMATION PREJUDICIAL TO THE DEFENCE OF REALM OR SAFETY OF PUBLIC

Mr. Clinton Davis: I beg to move Amendment No. 9, in page 21, line 14, leave out 'novelty' and insert inventive merit'.

Mr. Deputy Speaker: With this it will be convenient to take Government Amendment No. 10.

Mr. Davis: This amendment covers a point made in Committee by the hon. Member for St. Ives (Mr. Nott). I promised to consider the matter further. During the debate in Committee, I said that the word "novelty" as used in Clause 22 did not have the same meaning as in connection with Clause 2 and the state of the art. I accept that this could be misleading.
On further reflection, despite my original misgivings, I think that the words "inventive merit" express more clearly the intention of Clause 22(7)(b).
I was amused at the way in which the hon. Gentleman, after he had made the plea for the change, concluded:
Perhaps the Minister will say what he feels about that?"—[Official Report. Standing Committee D. 5th July 1977; c. 207.]
"mind" appears as a misprint for "Minister". I then stood up.

Mr. Nott: I am grateful to the Minister for moving this amendment. We have never had any doubts about the quality of his mind, but only about his judgment when it comes to his political beliefs.

Amendment agreed to.

Clause 23

RESTRICTIONS ON APPLICATIONS ABROAD BY UNITED KINGDOM RESIDENTS

Amendment made: No. 10, in page 21, line 33, after 'before' insert 'on'.—[Mr. Clinton Davis.]

Clause 24

PUBLICATION AND CERTIFICATE OF GRANT

Mr. Clinton Davis: I beg to move Amendment No. 11, in page 22, line 27, at end insert:
',the names of the proprietor and (if different) the inventor and any other matters constituting or relating to the patent which in the comptroller's opinion it is desirable to publish'.
This amendment makes it clear that the Comptroller shall put not only the specification of the patent as specified in the present draft but the names of the proprietor and the inventor and such other matters as he considers desirable. This follows from amendments agreed in Committee, which gave the inventor the right to be mentioned in the patent.

Amendment agreed to.

Clause 25

TERM OF PATENT

Mr. Clinton Davis: I beg to move Amendment No. 12, in page 22, line 41, leave out from beginning to 'paid' in line 1 on page 23 and insert
'If during the period of six months immediately following the end of the prescribed period the renewal fee and any prescribed additional fee are'.

Mr. Deputy Speaker: With this it will be convenient to take Government Amendment No. 13.

Mr. Davis: The purpose of the amendment is to do away with the reference to a request to the Comptroller for an extension of time in which to pay the renewal fee. There are two reasons for this. First, the Paris Convention requires such an extension to be allowed. Therefore, the Comptroller has no discretion in the matter. He has to allow an extension. Secondly, a request as such has no effect whatsoever unless and until the necessary fees have been paid. The result is that once the fees have been paid, the extension will follow automatically. The amendment reflects the reality of the situation.
Amendment No. 13 relates to Clause 28(3)(a), which refers to the
period allowed under section 25(4) above".
That is wrong because, in the circumstances of restoration of a patent as envisaged by Clause 28, no such period has been allowed, although it could have been.

The amendment rectifies this error by abandoning the reference to "section 25(4)" and setting out the period in question in explicit terms.

Amendment agreed to.

Clause 28

RESTORATION OF LAPSED PATENTS

Amendment made: No. 13, in page 24, line 16, leave out from first period' to 'not' in line 18 and insert
'or that that fee and any prescribed additional fee were paid within the six months immediately following the end of that period, and
(b) those fees were'.—[Mr. Clinton Davis.]

Clause 32

REGISTER OF PATENTS, ETC.

Mr. Clinton Davis: I beg to move Amendment No. 14, in page 28, line 19, leave out subsection(4).

Mr. Deputy Speaker: With this it will be convenient to take Government Amendments Nos. 15 and 16.

Mr. Davis: These amendments implement the undertaking I gave in Committee to give effect to Amendment No. 46, which was moved by my hon. Friend the Member for Nottingham, West (Mr. English). I am grateful to him for drawing my attention to the point at issue.
We are concerned here with proof in proceedings of entries in the register or of documents kept in the Patent Office or of extracts from such entries or documents. Consideration of my hon. Friend's amendment led to the conclusion that the proper place to deal with this matter was in Clause 35(3). Therefore, Amendment No. 14 deletes Clause 32(4).
Clause 35(3) provides the method of proof for entries and documents to be kept in legible form. Amendment No. 15 helps to make the revised Clause 35(3) easier to read. It is divided into separate paragraphs.
Amendment No. 16 gives effect to my hon. Friend's point about enabling entries in the register which are kept in other than legible form—for example, on magnetic tape or punched cards in a computer—and extracts from such entries to be proved by production of copies in a legible form certified by the Comptroller and bearing the Patent Office seal.

Amendment agreed to.

Clause 35

EVIDENCE OF REGISTER, DOCUMENTS, ETC.

Amendments made: No. 15, in page 30, line 7, at beginning insert
'Each of the following, that is to say—(a)'.

No. 16, in page 30, line 9, leave out from ` published to 'purporting' in line 10 and insert—
(b>) a document reproducing in legible form an entry made in the register otherwise than in legible form; or
(c) an extract from the register or of any document mentioned in paragraph (a) or (b) above;'.—[Mr. Clinton Davis.]

Clause 38

EFFECT OF TRANSFER OF PATENT UNDER S. 37

Mr. Clinton Davis: I beg to move Amendment No. 17, in page 33, line 42, leave out from 'proprietors' to 'or' in line 44.
The amendment achieves a slight shortening of the Bill by deleting the unnecessary repetition of certain words.

Amendment agreed to.

Mr. Clinton Davis: I beg to move Amendment No. 18, in page 34, line 8, leave out 'the patent or'.
This amendment deletes an unnecessary reference in Clause 38(3) to working the patent. It is sufficient for the subsection to refer, as it will still do, to working the invention.

Amendment agreed to.

Clause 39

RIGHT TO EMPLOYEES' INVENTIONS

Mr. Mikardo: I beg to move Amendment No. 19, in page 34, line 20, leave out from 'shall' to end of line 37 and insert:
'be taken to belong to that employee for the purposes of this Act and all other purposes, unless the employer can show that the invention was made in the course of undertaking or managing research work for which the employee was employed or in the course of a specific project on which the employee was working and the circumstances in either case were such that an invention might reasonably be expected to result from such work:
Provided always it shall not be presumed against an employee that an invention is ex-

pected to result from the carrying out of such work unless it is specified in his contract of employment.
(2) Where an invention made by an employee is deemed under subsection (I) above to belong to the employer and where the employer having patented that invention has not within a period of two years from having been awarded the patent fully worked that patent, the comptroller, upon application by the employee, shall revoke the patent and assign it to the employee who made the invention.'.
I shall detain the House for only a few minutes in moving this amendment. I do not need to do more than that, because it covers an area that was widely and exhaustively canvassed in Committee and to which hon. Members on both sides gave earnest and close attention.
It would be wrong if I did not begin by expressing appreciation to the Government for having introduced provisions for the protection of the employee inventor, because such provisions had not previously existed and do not today exist in our legislation. My only regret is that, having done that—they deserve full marks for having done it, especially as it must have been difficult to draft these provisions—they did it half-heartedly, not full-heartedly. They have used a number of catch-all phrases in the Bill—that is the only way they can be described—which considerably weaken the position of the employee inventor against his employer in a number of circumstances.
We moved many amendments on this matter in Committee. My hon. Friend the Under-Secretary of State did not argue that the amendments were wrong. His argument all the time was that the drafting was a compromise agreed by what he called "both sides" and that it would be wrong to upset that compromise.
I should explain what is meant by "both sides". They comprised a group of people who were representative of a number of organisations. There were two who might be expected to look after the interests of the employee inventor and a much larger number who might be expected to take the opposite view. In other words, it was an unbalanced, one-sided Committee. It was not a compromise. The Committee was weighted heavily in one direction. Therefore, I do not find it easy to accept the answer so frequently given by my hon. Friend, and supported by Opposition Members in Committee, as a substantive answer


to the points that we made in Committee.
12 noon.
I found it not altogether surprising, and in many ways indicative, that the great majority of my amendments were voted down in Committee by a majority which consisted of the Minister, the Whip and hon. Members opposite, the minority consisting of the rest of the Labour Members on the Committee. There is some significance in that and it will be noted in a number of quarters.

Mr. Richard Wainwright: Perhaps the hon. Gentleman would like to sharpen up his definition in speaking about "hon. Members opposite" in the context of what happened in Committee, because I was glad to support many of the hon. Gentleman's amendments.

Mr. Mikardo: That is absolutely right, and I am grateful to the hon. Gentleman for that and for now reminding me about it. I always find it difficult to consider the hon. Gentleman as a member of an Opposition party and, therefore, I did not include him in that general condemnation.
My last point is a practical one and it is about the danger that exists—it is not a theoretical danger, because anyone who has worked in a high technology industry for any length of time knows that it has happened repeatedly—that an employee's invention may be taken over by his employer and then sat on and no patent taken out, or else the patent is taken out but nothing is done about it. There are many authenticated and well-documented cases in which this has happened. If that happens, the employee gets nothing.
It was for that reason that I moved a number of amendments in Committee which were designed to secure that when that happened the employee would still receive some benefit. I did not succeed in Committee. That is why I have moved this amendment, which is intended to achieve the same conclusion by a different means.
It is in the interests of British industry that a worthwhile invention should not be thrown into a bottom drawer and the drawer locked upon it. The inventor loses through that, and so does the eco-

nomy of the whole nation. We ought to do everything possible to discourage this practice. Sometimes an employer has a legitimate interest which means that it would be to his advantage not to pursue the invention. That is his business, and if he chooses to follow such a line no one has the right to interfere. However, the employee should have the right to have his invention back so that he can develop it if he wishes to do so and if he can find somebody willing to help him.

Mr. Nott: As the hon. Member for Bethnal Green and Bow (Mr. Mikardo) said, we debated this in Committee, so I shall make only a short intervention. Contrary to what the hon. Gentleman implied, my hon. Friends and I are extremely pleased that the position of the employee inventor has been substantially improved in the Bill. We entirely accept that under the arrangements that hitherto applied the employee inventor was not adequately safeguarded and treated. That has been our position throughout.
I am sure that the hon. Gentleman will not disagree with me when I say that the only question that was raised in Committee was about the balance in the Bill between the interests of the employer—that includes the interests of the whole company, its employees and shareholders —and the interests of the single employee inventor. I do not agree with the hon. Gentleman that the panel which considered the matter of balance was one-sided. It contained representatives of the trade unions.
During the course of the debate on the Bill in the Lords, I had to persuade a number of employers and representatives of large companies not to press their side of the case further, to accept that the balance between the interests of employer and employee which had been achieved was about right, and that it would be mistaken, given the progress that had been made with the Bill and the fact that we wanted the Bill—I know that the hon. Member for Bethnal Green and Bow wants it to—not to leave the Bill as it was and to reopen the question of balance.
The amendment that the hon. Gentleman has just moved in a rather low key fashion shifts the balance much further in the direction of the employee. It would


make the operation of companies in many fields of research, design, production and development largely unworkable. I must repeat the point I made in Committee that one must look at the activities of employees and employers within a firm as being essentially a team exercise. If too much emphasis is placed upon the rights of single employees, it will detract from the interests of other employees and the prosperity of the firm. It will therefore interfere with the prospects of other employees.
The balance in the Bill is right. I know that the Government take the same view, and I therefore cannot go along with the amendment. I shall not go into specific reasons now, because no doubt the Minister will wish to say a few words on that.
The hon. Member for Bethnal Green and Bow was right about one thing even if he was not correct about anything else. He was right in excluding the Liberal spokesman from his phrase "the other side". The representative of the Liberal Party who is here today should be sitting alongside the hon. Gentleman. The Liberal Party is now in full support of the hon. Gentleman, Labour policies and political attitudes. I therefore congratulate the hon. Gentleman on the manner in which he made his statement because he was, as always, accurate, although I do not entirely share his political beliefs.

Mr. Mikardo: The hon. Member for St. Ives (Mr. Nott) is having a nice bit of fun about the Lib-Lab pact but he is up the wall about it. I made exactly the same references to the hon. Member for Colne Valley (Mr. Wainwright) several years ago, before the Lib-Lab pact had ever been dreamed of.

Mr. Nott: I do not suppose that the hon. Member for Colne Valley (Mr. Wainwright has much changed his political views over a long time. However, I was referring to the Liberal Party, which is now in alliance with the hon. Member for Bethnal Green and Bow and his hon. Friends, so we should leave the matter there. I do not agree with the amendment for reasons that I gave in Committee, but I shall not extend the debate further now.

Mr. Clinton Davis: I do not propose to follow the remarks of the hon. Mem-

ber for St. Ives (Mr. Nott), except to say that he is being churlish, insensitive and unrealistic and that I hope that his attitude will eventually receive the attention from the electorate that it deserves.
My hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo) and the hon. Member for Colne Valley (Mr. Wainwright), as well as some of my hon. Friends who raised the matter in Committee, have done a service to the House because it is right that attention should be focused on this important issue. I am grateful for the remarks that my hon. Friend the Member for Bethnal Green and Bow made about the introduction of the scheme. My hon. Friend was absolutely right, because if the Government had chosen the soft way out—and that way was open because we were under no great prssure from industry to do this—and if this initiative had not been seized by the Government, these provisions would not be in the Bill.
This proposal was the result of consultations on a wide scale, not restricted simply to the working group. People were at liberty to formulate their own views. Therefore, I find it rather surprising that, if the trade union movement as a whole felt as strongly as my hon. Friend feels—that the package needed to be beefed up—its representations were at such a low level, so low, indeed, as almost not to be heard at all.
Although my hon. Friend does not altogether applaud the fact that the working group was established, I believe that it was necessary. It was not as unrepresentative as he suggests. It was broadly representative of the various strands of interest. It could not be too large an organisation. The employee inventor's interests were represented by the TUC and Institute of Patentees and Inventors representatives. I cannot accept that it was unevenly balanced. Nor can I accept that its conclusions, which were closely argued. ought to be rejected.
This must be seen against the background that not all the participants were enthusiastic for the aims or conclusions of the working group. But a consensus was achieved. It is noteworthy that it was achieved in the circumstances. It was a compromise. If the working group had disagreed, the position would have been infinitely more difficult. I believe that the Government are right to assert that


they should be slow indeed, unless the evidence was overwhelmingly the other way, to undo the package arrived at.
Having appreciated the fact that we have gone further than ever before, my hon. Friend says that we have weakened the position of the employee inventor as against his employer. That is not a fair summation of the situation. The hon. Member for St. Ives was right to say that if we had reopened the whole issue there would have been considerable demands, by those opposed basically to what was happening in opening up opportunities for employee inventors, to reopen that issue too. That would have been a grave error. It would have imperilled the passage of the Bill, and in the light of its fundamental importance in the context of ratification of the European Convention it would not have been justifiable to take that risk.
I do not believe, however, that the Bill will have the effect that my hon. Friend suggests. One must also remember the collective agreements. The steps towards collective agreements in this matter will probably cover the position of many employee inventors who are trade unionists and are covered by working agreements. These provisions will not touch them. I do not think it necessary for me to underline the philosophy of these provisions, but I must deal with the amendment because it is not enough simply to oppose it on Report as a matter that was simply dealt with upstairs.
My hon. Friend would change the whole balance in favour of the employee inventor—at least supposedly, because, again, I think that the point taken by the hon. Member for St. Ives is a good one. If we did that to the extent that I think would be achieved by the amendment, it would be capable of giving rise to a good deal of resentment on the part of other employees. It could be divisive, and that would not be in the interests of the employee inventor or of British industry.
12.15 p.m.
The other point that my hon. Friend omitted to mention is the compulsory licensing system set out in Clause 48, in particular in subsection (3), which sets out the grounds on which a patented invention which is frustrated through the inactivity or idleness of an employer can

be used. That is an important facet of this package.
The amendment also contains a proviso to the proposed new subsection (1). It reproduces Amendment No. 57 moved by the hon. Member for Colne Valley in Committee. That amendment was negatived. I said then, and I repeat, that I appreciate the concern that the proviso shows for the interests of employees, but it is aimed at a target that is simply not there. It seeks to negative a presumption which does not exist. I do not believe that the courts would presume against an employee anything of the kind alleged in the proviso. There is no such presumption, and even if there were, like all other legal presumptions, it would be rebutted with proof to the contrary.
There is more to the substance of the proviso. It would not be right to make the presence or absence of a term in the contract of employment conclusive on this issue. I cannot believe that that would be justifiable. An employee's duties are not unchangeable. They change from time to time, and there must be flexibility. It would be a great inconvenience, to put it no higher, to industry if, instead of getting on with the job, employers and employees had first of all to renegotiate all the terms of the employee's contract of employment and while that lengthy process was going on a competitor, domestic or foreign, could gain decisive advantage. What we are seeking to achieve—letting the parties get on with the business in hand—is, we believe, the right approach on this aspect.
I believe, too, that such a proviso as part of one law would bedevil industrial relations. It would lead some employers to require of new employees an agreement to a term making inventions that they might achieve the property of the employer whether or not there was real prospect of an invention resulting. Even where that was not done, employers would surely hesitate to embark on a renegotiation of an employee's contract of employment. They would surely tend to give the work to those employees whose terms of contract they considered most satisfactory to themselves. This could lead to the best man for the job not getting it. That would constitute a source of frustration to the employee as well as to his employer and could hardly be said to be in the national interest.
Having regard to the tremendous variety of circumstances in which inventions are made by employees, I believe that the wording of Clause 36 gets as near as possible to resolving the issue of ownership and if we made the test more rigid, as by limiting cases in which the employer is the owner to those involving research work—I do not know what "research work" in this context really means—it would lead to the practical difficulties I have referred to.
My hon. Friend's proposed new subsection (2) is similar in substance to the latter half of Amendment No. 224 that he moved in Committee. That amendment was fully discussed before it was negatived. I need not rehearse the arguments again, because he has chosen not to do so today, but I hope the House will find that what the Bill proposes is a satisfactory way to deal with the matter.
I believe that the compromise which has been worked out will confer considerable advantages on employee inventors. We should be very slow to try to unravel them. The risks are too great. I believe that the Government were right to avoid unnecessary division on this issue and that if the unions had felt that the employee inventors they represented would be seriously disadvantaged they would not have been slow to react. I hope, therefore, that my hon. Friend will not press his amendment.

Amendment negatived.

Clause 44

AVOIDANCE OF CERTAIN RESTRICTIVE CONDITIONS

Mr. Clinton Davis: I beg to move Amendment No. 22, in page 40, line 39, leave out 'him' and insert 'that other party'.
This is a drafting improvement. In place of the word "him" it substitutes a reference to "that other party", thereby removing any ambiguity which might be thought to exist as to which antecedent the word "him" referred.

Amendment agreed to.

Clause 53

SUPPLEMENTRY PROVISIONS

Mr. Clinton Davis: I beg to move Amendment No. 23, in page 50, line 15, leave out from 'treaty' to end of line 16 and insert:
'or international convention to which the United Kingdom is a party '.

Mr. Deputy Speaker: With this we may take Government Amendment No. 36.

Mr. Davis: This is a purely drafting amendment.

Amendment agreed to.

Clause 55

USE OF PATENTED INVENTIONS FOR SERVICES OF THE CROWN

Mr. Nott: I beg to move Amendment No. 24, in page 52, line 26, leave out
'contrary to the public interest'
and insert:
'prejudicial to the defence of the realm or the safety of the public '.
We debated the principal of allowing these amendments in Committee but we did not make a great deal of progress with the Minister, who was kind enough to write me a letter on 13th July on the subject. However, I am still unhappy about what is intended in the Bill and I wish briefly to run through the arguments we used in Standing Committee.
We did not agree that the terminology in the Bill—
contrary to the public interest"—
was specific enough, and we wished to insert instead the words in the amendment. We feel that the term
contrary to the public interest
is very wide.
I shall give two examples of why we are concerned. First, it may be the view of the Government and of the Departments that it would be contrary to the public interest to allow payments to go abroad under patents because of their impact on the balance of payments. In such a case, it would be possible for the Government to say that it was contrary to


the public interest that large sums of money should go abroad under patented inventions, because at the particular time the Government were running a very substantial balance of payments deficit. We believe that it would be possible for that to be defined so as to meet the Government's point that such a practice would be contrary to the public interest.
Secondly, there might be cases where the Crown considers a patent to be invalid but where it would be contrary to the public interest for the Government to argue the case with the inventor because argument might be difficult and might lead to problems for the Government. We feel that such action should be deemed to be contrary to the public interest. Therefore, we feel that
prejudicial to the defence of the realm or the safety of the public
would enable the matter to be fully covered.
Finally, in a letter to me the Minister gave an example of where he felt an issue would be contrary to the public interest but would not come within the definitions that we had chosen. I am sure he will agree that it is reasonable to read out his example, which, to quote from his letter, was as follows:
it might well be against the public interest for it to become known that a new security device was in use in H.M. Prisons, although the description of the device in a published patent specification could not be said to be prejudicial to the defence of the realm or the safety of the public".
I am not sure about this particular example. A new security device in a prison is very much related to the safety of the public.

Mr. Clinton Davis: I tend to agree with the hon. Gentleman. I think that from a wide permutation of possibilities we chose about the worst.

Mr. Nott: That is a very fair admission. I could have dreamed up a hundred examples to support the Minister's case, and that was not a very good one.
Will the Minister answer my first question? Could not the Crown claim that it would be contrary to the public interest, if we were running a substantial balance of payments deficit, to enter into an arrangement under which large sums of money could flow across the exchanges

under a new patent? The Minister is a lawyer. Does he not consider that it would be deemed to be contrary to the public interest? We are very concerned, and so is the patent agents profession, that this provision goes much too wide. It is the job of the House to make sure that the executive arm of the Government is not allowed, because of the loose drafting of legislation, to avoid the sanctions which should exist in a clause of this kind.
We have always accepted that there will be inventions which are prejudical to the defence of the realm or which involve situations prejudicial to the defence of the realm or the safety of the public. We understood what the Government were doing in New Clause 1. We did not oppose it. I still believe that this provision is much too broadly drawn and will give the bureaucracy, if I may use that term in no offensive sense, too much discretion.
I am sorry that the Minister has not taken this on board. He should have stood out against his advisers and come round to our view. Perhaps he can say something about it now.

Mr. Clinton Davis: I am not able to go along with the hon. Member for St. Ives (Mr. Nott) in his strictures about what I ought to have decided, because I gave this matter very careful consideration, as I gave to all the amendments considered in Committee which were likely to be part of a debate here. The hon. Gentleman omits in his contribution this morning to recognise that what has happened with the Bill is simply a restatement of what appears in Section 46(5) of the 1949 Act. It has never given rise to any difficulties. If it had, the Government would have been aware of them. What is even more to the point, the Opposition would have been told of them. However, the Opposition are not able to cite any instances of difficulties arising.

Mr. Nott: I did not endeavour to seek out examples, but this point would not have been brought to us in this new legislation had there not already been grounds for concern in the profession that the provision was too wide under the old Act. I fully accept that this is putting into the new legislation what was contained in the old. I am sorry that


the Minister wanted examples from me. I am sure that I would have been able to produce specific examples of something that had arisen in the past. I hope he will not press that aspect, because it is not quite fair.

Mr. Davis: I do not want to appear to be unfair. My right hon. and learned Friend the Solicitor-General said in Committee that no difficulties had been brought to our attention. Therefore, my point is absolutely fair. If there were difficulties, we would have known about them. My right hon. and learned Friend also stated that we were not very far divided on the objectives of the clause. When one uses an umbrella phrase of this kind, difficulties are likely to occur in theory, if not in practice.
12.30 p.m.
The hon. Gentleman effectively asks me to give him better examples than I have produced in the letter. I shall give him two. Suppose, for example, that some new form of Totalisator was in vented. It could hardly be said, if it was likely to be injurious to the public interest in some way, that it was prejudicial to the defence of the realm or to the safety of the public. It might, however, be contrary to the public interest. Again, there might be a security system —this is perhaps carrying it to absurd limits—in Government buildings whereby people admitted to those buildings were enclosed and given no opportunity for egress. That might not be prejudicial to the defence of the realm—it might even be to the advantage of the safety of the public—but it could be contrary to the public interest.

Mr. Nott: May I ask the Minister about his first example? In what circumstances would a new Tote be contrary to the public interest? This type of example is what bothers us. Are we suggesting that the judgment of Methodists and those who feel strongly about betting could be induced to support the public interest?

Mr. Davis: It was not a moral argument which I was making. I was talking in terms of some device which could constitute a fraud on the public in some way. There is a wide permutation of possibilities that could be cited which would not fall into the category the hon.

Gentleman seeks to use. The point that the hon. Gentleman makes about the balance of payments might involve something which could be regarded as being contrary to the public interest. I suppose that, particularly in this area, it might already have happened. It does not appear to have done so. Parliament is the guardian of the people's rights, and if legislation is seen to be too broad, not simply in theory but in practice, and is working to the disadvantage of those rights, I am sure that Parliament would not be slow to give protection. We also have a Parliamentary Commissioner, which is another important safeguard. The point is that this provision has been in operation for many years and has given no practical, as opposed to theoretical, difficulty. In the light of the arguments produced, I do not feel that there is anything to justify changing the situation.

Mr Nott: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57

RIGHTS OF THIRD PARTIES IN RESPECT OF CROWN USE

Mr. Clinton Davis: I beg to move Amendment No. 25, in page 56, line 2, leave out 'knows' and insert has been informed

Mr. Deputy Speaker: With this we may take Government Amendments No. 26 and 27.

Mr. Davis: Clause 57(8) specifies that where there is an exclusive licensee any determination by the court of an amount of payment in respect of Crown user of the invention shall be of no effect unless the licensee knows of the reference to the court and is given an opportunity to be heard. Proof of knowledge may, however, be difficult to establish. Proof of notification, on the other hand, should always be possible if it has, in fact, taken place. The amendment therefore requires that the licensee should have been informed, as opposed to "knowing", of the reference. That, moreover, is consistent with the provisions in legal procedure as to notification of court proceedings in other respects. The other amendments concern drafting matters.

Amendment agreed to.

Clause 60

MEANING OF INFRINGEMENT

Amendment made: No. 26, in page 60, line 23, leave out 'to'.—[Mr. Clinton Davis.]

Clause 66

PROCEEDINGS FOR INFRINGEMENT BY A CO-OWNER

Amendment made: No. 27, in page 65, line 15, leave out 'that section' and insert 'section 36 above'.—[Mr. Clinton Davis.]

ROYAL ASSENT

12.45 p.m.

Mr. Deputy Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Passenger Vehicles (Experimental Areas) Act 1977
2. Redundancy Rebates Act 1977
3. New Towns Act 1977
4. Merchant Shipping (Safety Convention) Act 1977
5. Minibus Act 1977
6. Licensing (Amendment) Act 1977
7. Presumption of Death (Scotland) Act 1977
8. Control of Food Premises (Scotland) Act 1977
9. Town and Country Planning (Amendment) Act 1977
10. Rentcharges Act 1977
11. Farriers (Registration) (Amendment) Act 1977
12. Torts (Interference with Goods) Act 1977
13. Price Commission Act 1977
14. Northern Ireland (Emergency Provisions) (Amendment) Act 1977
15. British Linen Bank Order Confirmation Act 1977
16. Fidelity Trust Act 1977
17. International Planned Parenthood Federation Act 1977
18. London Hydraulic Power Act 1977

19. London Transport Act 1977
20. Shrewsbury and Atcham Borough Council (Frankwell Footbridge) Act 1977
21. West Midlands County Council Act 1977
22. City of London (Various Powers) Act 1977

PATENTS BILL [Lords]

Clause 71

DECLARATION AS TO NON-INFRINGEMENT

Mr. Clinton Davis: I beg to move Amendment No. 28, in page 67, line 38, after 'declaration', insert or declarator

Mr. Deputy Speaker: With this we may also discuss Government Amendments Nos. 29 and 30.

Mr. Davis: After that impressive list of Acts, I believe that the exciting things that I am about to say will come as something of an anti-climax. This amendment is a drafting amendment, as is Amendment No. 29. Amendment No. 30 makes it clear beyond doubt that the intention of declaration by the Comptroller under this clause shall have the same effect as a declaration or declarator by the court. This is subject to the reservation concerning estoppel contained in Clause 72.

Amendment agreed to.

Amendments made: No. 29, in page 68, line 5, leave out 'the plaintiff or pursuer' and insert 'that person'.

No. 30, in page 68, line 11, at end insert—
'(2) Subject to section 72(5) below, a declaration made by the comptroller under this section shall have the same effect as a declaration or declarator by the court.'É[Mr. Clinton Davis.]

Clause 78

EFFECT OF FILING AN APPLICATION FOR A EUROPEAN PATENT (UK)

Amendment made: No. 31, in page 75, line 45, leave out from beginning to 'shall' and insert:
'section 28(8) and (9) above—[Mr. Clinton Davis.]

Clause 82

JURISDICTION TO DETERMINE QUESTIONS AS TO RIGHT TO A PATENT

Amendment made: No. 32, in page 80, line 4, leave out 'one' and insert 'either'.—[Mr. Clinton Davis.]

Clause 91

EVIDENCE OF CONVENTIONS AND INSTRUMENTS UNDER CONVENTION

Mr. Clinton Davis: I beg to move Amendment No. 33, in page 88, line 20, after 'institution' insert:
'or reproducing in legible form any information in such custody otherwise than in legible form'.
The amendment facilitates the proof in legal proceedings of documents kept by a convention institution as defined in Clause 91(6). The amendment corresponds to amendments made earlier to Clause 30 in respect of a United Kingdom patent register of documents kept in the Patent Office in computerised form.

Amendment agreed to.

Clause 97

APPEALS FROM THE COMPTROLLER

Mr. Clinton Davis: I beg to move Amendment No. 34, in page 91, line 24, leave out from 'may' to end of line 26 and insert
'consist of one or more judges of that'.

Mr. Deputy Speaker: With this we may take Government Amendment No. 35.

Mr. Davis: The first of these two amendments deletes from Clause 97 a reference to Section 63(1) of the Supreme Court of Judicature (Consolidation) Act 1925, which is no longer required because that provision of that Act is being deleted by the Administration of Justice Bill, which is currently being considered by the House. That Bill should also become law.

Amendment agreed to.

Amendment made: No. 35, in page 91, line 29, leave out from 'of' to '(appeals' in line 30 and insert
'section 31(1)(f) of the Supreme Court of Judicature (Consolidation) Act 1925 '.—[Mr. Clinton Davis.]

Clause 99

GENERAL POWERS OF THE COURT

Amendment made: No. 36, in page 92, line 24, after second or 'insert international'.—[Mr. Clinton Davis.]

Clause 104

PRIVILEGE FOR COMMUNICATIONS WITH PATENT AGENTS RELATING TO PATENT PROCEEDINGS

Mr. Clinton Davis: I beg to move Amendment No. 37, in page 94, line 16, after 'comptroller' insert 'or'.

Mr. Deputy Speaker: With this we may take Government Amendment No. 38.

Mr. Davis: This is a purely drafting amendment.

Amendment agreed to.

Amendment made: No. 38, in page 94, line 30, after 'comptroller' insert 'or'—.[Mr. Clinton Davis.]

Clause 112

RESTRICTIONS ON PRACTICE AS PATENT AGENT

Mr. Clinton Davis: I beg to move Amendment No. 39, in page 97, line 38, leave out 'member of the body and' and insert
',where the body's affairs are managed by its members, every member of the body and in any event,'.

Mr. Deputy Speaker: With this we may take Government Amendment No. 42.

Mr. Davis: As at present drafted, subsection (2)(b) requires, in the case of every body corporate which began to carry on business as a patent agent before 17th November 1977, that every director and member of the body must be registered as a patent agent before the body can describe itself as a patent agent. That would mean that all the shareholders of the company which began to carry on business as a patent agent after that date would have to be professionally qualified. That would be somewhat difficult and undesirable. It is not what was intended.
The members referred to are meant to be those persons who control bodies corporate and exercise functions equivalent to those of a director.
The first of the amendments corrects the reference accordingly and the second deletes the definition of "director" in Clause 128(1), because there is no longer the need for a general definition applicable to the whole Act.

Amendment agreed to.

Clause 125

EXISTING PATENTS AND APPLICATIONS

12.45 p.m.

Mr. Clinton Davis: I beg to move Amendment No. 40, in page 104, line 10, leave out
'(subject to the provisions of that Schedule)'.

Mr. Deputy Speaker: With this we may take Government Amendments Nos. 41, 44, and 77.

Mr. Davis: This is a purely drafting amendment.

Amendment agreed to.

Amenedment made: No. 41, in page 104, line 36, after provisions ', insert and savings '.—[Mr. Clinton Davis.]

Clause 128

INTERPRETATION

Amendment made: No. 42, in page 107, leave out lines 3 to 8.—[Mr. Clinton Davis.]

Mr. Clinton Davis: I beg to move Amendment No. 43, in page 110, line 5, after '72(1)' insert 'and (2), 74(4),'.
The amendment adds to additional provisions in Clause 128(7) which are designed to achieve conformity with Europe.

Amendment agreed to.

Clause 130

SHORT TITLE, EXTENT, COMMENCEMENT AND REPEALS

Amendment made: No. 44, in page 111, line 17, leave out from Schedule' to end.—[Mr. Clinton Davis.]

Schedule 1

APPLICATION OF 1949 ACT TO EXISTING PATENTS AND APPLICATIONS

Mr. Clinton Davis: I beg to move Amendment No. 45, in page 112, line 7. at end insert
'(but not in relation to patents and applications for patents under this Act)'.

This is a drafting amendment.

Amendment agreed to.

Mr. Clinton Davis: I beg to move Amendment No. 46, in page 112, line 8, leave out from '12 to 69' in line 9 and insert
'13, 15 to 17, 19 to 21, 22(1) to (3), 23 to 26, 28 to 33, 46 to 53, 55, 56, 59 to 67,'.
This is essentially a structural rather than a substantive amendment. I do not think that I need to spell it out.

Amendment agreed to.

Mr. David Crouch: I beg to move Amendment No. 47, in page 112, line 34, after 'years', insert
'or, in the case of a pharmaceutical patent, fourteen years,'.

Mr. Deputy Speaker: With this we may take the following amendments:

No. 48, in page 112, line 39, at end insert—
'(bb) a pharmaceutical patent for these purposes means a patent related to the manufacturer of organic chemical compositions capable of use and, to the extent only that they are so, applied in medical diagnosis, therapy or prophylaxis.'

No. 50, in page 113, line 5, at end insert
'and in considering any application under the relevant section for an extension of an old existing pharmaceutical patent the court shall take into account the special circumstances of the pharmaceutical industry.'

No. 55, in page 113, line 37, after 'patent', insert
'other than a pharmaceutical patent'.

Mr. Crouch: I am afraid that at this stage there may be some slowing up in our rapid progress, but I shall try not to slow up any more than is necessary to put my argument to the Minister. This is not a day when I am seeking to sway the House, but it is a day when I seek to communicate my ideas to the Minister, for whom I have considerable regard and


who I know has had a great deal of information given him about the matter of which I am about to speak, in Committee, in the other place and in his Department.
I must first declare an interest. We are talking about the pharmaceutical industry. I must declare that I am in that industry and am a director of a pharmaceutical company.
The Bill is undoubtedly an improvement on the 1949 Act. In one important sense it is a great improvement, in that it grants a 20-year life to new patents, compared with only 16 years granted under the old Act. But the Bill goes further, and grants an extension to existing patents. It rightly recognises the need to make this reform effective at once. The Bill is not only about the inventions and patents of tomorrow; it seeks to produce an immediate change for the better. This is a reforming Bill and an imaginative one. It recognises the importance of existing patents. It requires the advantage and protection of these new inventions and it is an advance towards helping British industry, British science and British technology.
The Bill is designed to encourage British innovation, initiative and invention. It is part of a plan to regenerate British industry not in the long distant future but at once, with no delays or bureaucratic interference. It will, of course, present problems for the administrators, for the careful co-ordinators of Government regulations and for the lawyers, the patent attorneys and agents, and all those who toil away so assiduously to protect British industry from unlawful interference and from contamination by predators, copyists and imitators.
These protectors—the patent lawyers and other Government protectors—will have to accept the changes made in this new Bill, because the Bill offers industry more protection—a longer patent life. Technology today needs strong patent protection. Scientific and technological achievements must have patent protection if they are to mean anything. Nothing can be done with them if that protection is weakened in any way.
Industry as a whole has welcomed these changes for the future and the changes that are offered for existing patents. After lengthy consideration, the industry has produced a recommendation,

through the Standing Advisory Committee, that existing patents with more than five years to run should be extended from a 16-year life to the full 20 years that will become law for all new inventions after the appointed day.
I think that that was a very reasonable recommendation as a general rule and as a norm, but all industry does not fit the norm. We cannot ignore the argument for a differential in some cases. I believe that the Bill will be inadequate and imperfect if it does not take into account that differential factor in regard to one industry, the pharmaceutical industry. I am making a plea for the industry not because I am connected with it but for a number of special reasons.
There is a very good reason for not extending all existing patents across industry at the drop of a hat. Manufacturers tend to wait in the wings for patents to run out, and while they wait they prepare themselves to go into production of a patented product as soon as they are legally free to do so when the patent expires. They not only commit themselves to investment; they often embark on great plans of expansion. We should do nothing to inhibit such initiative and investment and the growth that can come from them for those manufacturers who seek to take up a patent, who seek properly to muscle in on a patent when their rightful opportunity occurs.
That is why the limit of five years or more to run has been included in the Bill for existing patents. I do not argue against it in general, because manufacturers have been waiting to take up patents near the end of their 16-year life and a decision to enter the lists as producers is not a light one. It is often a very expensive decision, which can mean a big investment. To take up a major industrial patent can involve many millions of pounds. In the petrochemical industry, for example, the scale of investment is from £200 million to £300 million, in the nuclear industry it is much higher, and in the aviation industry it is likely to be even higher.
Therefore, manufacturers are not likely to rush in when they see a patent running out. They must take into account their capacities and capabilities, the availability of resources and finance, before they can enjoy the advantage of a patent that is running out, whether it be held in


this country or owned by a foreign company.
But one industry stands out as different from all the rest in the patent business—the pharmaceutical industry. A pharmaceutical product does not require massive plant or complicated machinery for its production. It is a small process to produce a pill, a tablet, a cream, a powder or a liquid. The starting chemicals, the intermediates, can be bought freely in this country and other parts of the world. It is the putting of those intermediates together to form a hitherto protected and patented drug that is the necessary task. No great cost is involved, once one gets one's hands on a patent, because all the expense is in the research, which has already been paid for. Here I am talking of research paid for by a British patent holder, because we are one of the leading countries in the world in innovation in the development of pharmaceuticals.
I shall name one British firm that I know of—not one with which I am connected—that in recent years has moved out of the old-fashioned chemical business into the new-fashioned organic chemical business and the pharmaceutical industry in particular. That firm, Fisons, is currently spending on research one-third of the disposable profit from its pharmaceutical production. It is ploughing profits back into the business of science and technology and research, not into new machinery or new plants. It is finding it necessary to make its major investment in scientists and scientific equipment because that is the only way to keep ahead. One cannot afford to fall behind in that business. One must match one's competitors' efforts in scientific research and development.
A pharmaceutical product is unique, not because it is a protected invention of which we can be proud, and which can earn great financial rewards for this country, but because it cannot earn great rewards for the best part of its patent life. From the day application is made for a patent for a lifesaving drug, a major curing drug or simply a pain killer, the sale of the new drug is forbidden. It must be tested first under the most rigorous conditions and by lengthy procedures. It must pass a Government

Committee—the Committee on Safety of Medicines, set up in 1971.
That is absolutely right. I would not ask that the process be accelerated in any way. I would prefer delay if it meant a better safeguard for public health. I would certainly rather see a new drug with possibly great potential fail to pass its test and not be allowed to be marketed if that would prevent any risk to a patient to whom it might be given.
The money involved would not have been wasted. The cost is something that the pharmaceutical industry has come to expect. The time would not have been wasted. That is something else that the industry must endure. It is used to failure. But if it succeeds in getting a product past the Committee it is entitled to financial success in the few years left to it for that patent. The industry is one of our most successful, innovative and competitive, and one of the most valuable creators of wealth for Britain. Last year it earned a net balance of payments surplus, after all imports were subtracted of £313 million. The Minister is well aware of these figures. Its exports amount to no less than 7 per cent. of the exports of all manufacturing industry in this country. Last year it sold at home about £420 million-worth of its products, almost entirely to the National Health Service. That is a large figure, but the much larger figure of £450 million worth was sold overseas. This is an export-earning industry for Britain, because it is an innovative industry. It draws on the great advantage that this country has a scientific base. It draws on our people, who are able to serve the country and a special technical industry so well as a result of a good educational base.
1.0 p.m.
However, the question will be asked of me, and it would be asked of anyone who made the plea that I am making, whatever its success or achievements: why should pharmaceutical industry be given special help, albeit for a few more years? The amendment requests that it be given help, not for five or 10 years but for three years.
Let me give one reason why the pharmaceutical industry should be given special help. I believe from the figures that I have seen that if the Minister is prepared to extend existing patents for


three years he will save this country up to £100 million, which will be lost if the Bill is passed in its present form. The patents that are presently covered could, if the amendment were accepted, continue for another three years, with this great export-earning potential for the country. If the Minister is not prepared to do that, we shall lose the opportunity and, what is more, welcome, so to speak, to this country competition from foreign copyists—not manufacturers who invest in research but manufacturers of pharmaceuticals who go around the world seeking to pick up patents and to muscle in when patents are running out.
It will cost £100 million if in the next five years we give away our existing patents to Italy, Romania and other Eastern European countries which have been waiting for us to let them slip through our hands. That will help not the Government nor the public but our foreign competitors. I do not wish to attack our bureaucrats, but I appreciate that what I am suggesting may not be helpful to them or to the lawyers, who like to see everything in its place, tidy and orderly, with no exemptions. It must be a nightmare to a lawyer for him to feel that there is a loophole or an exemption clause anywhere.

Mr. Clinton Davis: As one of the lawyers, may I say that we thrive on loopholes?

Mr. Crouch: Lawyers outside the Government service may thrive. I am thinking of the lawyers who serve the Minister and other Ministers and who like legislation to be neat and tidy, without exemption clauses and loopholes. I accept that my proposition is somewhat anti-lawyer, and I stand condemned. Perhaps I should withdraw. Perhaps I am guilty of untidiness. For once I feel a little dishevelled.

Mr. Clinton Davis: No.

Mr. Crouch: It is nice to hear that observation. As a non-lawyer, I am trying to make better law, not to please the lawyers. I am trying to improve the Bill and to safeguard research and technology in this country. A change of the sort that I am suggesting is needed if we are not to cut off our nose to spite our parliamentary face.
The pharmaceutical industry wants a little more time to enjoy its patent protection, without which it cannot exist. In Committee I asked for five years, but today's amendments are the result of our reflection on what was decided in Committee and on the Government's view, as expressed by the Minister. They take account of the Government's view and of the vote, although they did not defeat our proposition in Committee; they could only force a draw.
I realise that the Minister is anxious not to forget the rest of industry in listening to my plea for an exception to be made for one industry, no matter how strong my argument may be. I believe that he is aware that the sponsoring Department for the pharmaceutical industry, the Department of Health and Social Security, supports my case. The industry is seen by that Department as a valuable export earner and as being in a special position, not able to enjoy the full life of its patents like the rest of industry. It knows, as I know, that it takes between six and eight years for a new drug to pass its tests and be approved by the Committee on the Safety of Medicines before it can be sold to the National Health Service or abroad. That means that existing patents with five years or less to run will probably enjoy and profit from about eight years' instead of 16 years' protection from the copyists and foreign competition.
Like Oliver Twist, all I am asking for is a little more—another three years of patent life to give about 11 years of earning opportunity. I know that the Minister has had many serious representations made to him by the leaders of the British pharmaceutical industry. I know, too, that the National Economic Development Office, through its little NEDC for the industry, has written to him this week and to the Secretary of State lending support to my argument. The little NEDC is not simply comprised of manufacturers; it is a combination of manufacturers and trade unionists. It strongly supports the case, as I know from the letter, as does the sponsoring Department, which recognises the need to give the industry stronger patent protection for three years more than is provided for in the Bill.
Does the Minister agree that our case is fair and responsible and, most important


of all, that the amendment would be of advantage to one industry, the pharmaceutical industry, and to the country as one of the leading developers and producers of life-saving drugs in the world? Although this is the eleventh hour, I hope that the Minister will pay regard to what I have said as fairly as possible and with as little emotion as possible.

Mr. Richard Wainwright: Since the commencement of the Register of Members' Interests, I have registered an interest in a company which, among other things, deals wholesale in medicines, but I hasten to add that that does not give me any superior knowledge or experience which I can offer the House. I mention it simply as a precaution.
I agreed so much with what the hon. Member for Canterbury (Mr. Crouch) said that I do not wish to take up time by repeating his argument. We are debating a matter which has a strict time limit on its operation. I do not think that the Government should make a great meal of it on the ground of a basic principle. It is a tidying-up process to deal with the transfer from one form of legislation to another. By its nature it is something that is bound to admit to differences of treatment and of attention to specific problems. If we were dealing with a provision which had to last as long as Parliament was willing to allow it to last, I should listen with greater care to the Government's view. I see no difficulty in using the law to make adaptations for a specific industry.
The CBI—TUC package is entitled to respect. It received respect in Committee and in the House. We recognise that intricate matters of this kind must sometimes be negotiated outside the House. We are willing to go along with that. However, in such negotiations between outside bodies, however august and powerful they are, the Government must take the precaution of warning the parties concerned that the matter is subject to the will of Parliament. That is not an empty phrase, because hon. Members are not as docile to their party Whips as they were, perhaps, a few years ago. They must warn that upsets occur in the House almost weekly and, more important, that the House of Commons is still a place where an extraordinary variety of experience and knowledge is available.
He would be a bold Minister who would forecast to people outside that a substantial measure would go through Parliament without several hon. Members throwing an entirely new light on the legislation and bringing to bear an experience which had not been available to those putting together the package in an honourable way outside the House.
This issue is a case in point. For the generality of companies and individuals the transitional proposals are reasonable, but the House has thrown up an exception.

Mr. Clinton Davis: Not only has the House of Commons thrown up the exception. The hon. Member for Colne Valley (Mr. Wainwright) would be the first to accept that he has articulated a case without any new facts. The debate in Committee did not produce any new concepts. It articulated a particular view.

Mr. Wainwright: That is not the way in which I look at it. I have no information, and I stand to be corrected, but I doubt whether, in the construction of the CBI-TUC package, the special circumstances of the pharmaceutical industry were ventilated as fully as they have been in the House. Even on a Friday it is important that the House should look carefully at new facts which have come to light since the construction of the package. There is no doubt that the Lords, through a vote, differed from the Government as the result of persuasive evidence put to them by a noble Lord who was not able to play a part in constructing the package.
However much deference we pay to bodies of influence outside, we have a duty to consider new circumstances that are brought to light. This is one of them. Since it is a tidying-up operation, I see no reason why obstacles of legal principle or fine points of definition should be raised against the arguments of the hon. Member for Canterbury.

1.15 p.m.

Mr. Clinton Davis: I have devoted a great deal of time and attention to this subject, as has my right hon. Friend the Secretary of State for Trade. We have not approached the matter as a bureaucratic effort to achieve a tidy solution. That is far from reality.
The House is entitled to take account of the background when it assesses the


right solution to this difficult problem. Careful consideration has been given by industry as a whole through the standing advisory committee. I readily accept the doctrine enunciated by the hon. Member for Colne Valley (Mr. Wainwright) that simply because a committee, industry as a whole or the CBI and the TUC working together in tandem, has come forward with proposals the Government do not necessarily have to accept them. Ministers must make up their minds about what is in the best interests of the country and of industry as a whole. That is what I have tried to do, but I have not managed to satisfy the interests of the pharmaceutical industry.
To be fair to the hon. Member for Canterbury (Mr. Crouch)—I do not wish to withhold any evidence—he referred to strong representations that I have received from the API. He articulated those representations more eloquently than did that organisation. Its members are not parliamentarians, but they did a pretty good job.
I have received letters from the National Economic Development Office and, literally at the eleventh hour, from Dr. Kay of the National Research Development Council. That was a letter based on the assumption that the rest of British industry might not cavil at the proposal. It is a broad assumption which has not been tested. We have not had time to test the widespread reaction of industry to the selective treatment of the pharmaceutical industry. The hon. Member for Canterbury conceded that in Committee. Between then and now, a proper and extensive inquiry could not have been undertaken.
My objective has been rendered no easier because I am not a technologist. I am faced with the same problems as were described by the hon. Member for St. Ives (Mr. Nott) in Committee. He said:
It is difficult for us, not having great knowledge of the industries concerned, or of the impact of our decisions about one industry on other industries, to judge whether this subjective special commercial pleading will be damaging to other interests."—[Official Report, Standing Committee D, 5th July 1977; c. 223.]
The hon. Member put that elegantly and fairly.
However, having said that, we have to make decisions. [Interruption.] I have

just overheard what I do not think was intended to be too private a comment. The Government have had three months in which to canvass the ideas of the rest of industry. What has just been said by the hon. Member for St. Ives is really not a totally fair statement, because, until this issue was raised very forcibly in literally the last few days, the view of the standing advisory committee and the view of the rest of industry was quite clearly that no exceptions should be made. I do not think that I am misstating the position in any sense.
Therefore, if the hon. Member for Canterbury is now arguing, as does the pharmaceutical industry in the documents that it has sent to hon. Members, that the rest of British industry would not be harmed, although that is a point that is made I am not satisfied that it constitutes more than an assertion, and a bare assertion is not necessarily the naked truth.

Mr. Nott: I was consulting my hon. Friend the Member for Canterbury (Mr. Crouch) just now. The point that I was making to him was that, as the Minister will recall, industry generally was hoping for the five-year period. To be fair to the pharmaceutical industry, it was arguing throughout, from the very outset, as I understand it, that it wanted a complete run-out, which is what we debated in Committee. Then Lord Lloyd of Kilgerran proposed in the other place the two-year compromise. When I was consulting my hon. Friend, I was merely making the point that the two-year compromise, after all, arose and was voted for by their Lordships a very considerable period ago. Therefore, the period of consultation, which the Minister says has been so limited, has extended not simply since the end of the Committee stage but since the end of the proceedings in the other place. That was all that I was consulting my hon. Friend about.

Mr. Davis: Not quite—because the position of industry has been very consistent throughout. Throughout the debates in the House of Lords and the period following the debates there up to the point at which we were discussing the matter in Committee, there was a view that there should be no selectivity of approach here. I understand that there is some softening of attitude on the part of the CBI in that it is adopting a neutral


posture. It is certainly not coming out in favour or against this.
I cannot adopt a neutral posture in this matter. I think that my point is absolutely right. I hope that to some extent I shall be able to help the hon. Member for Canterbury in what I shall be saying shortly. It will not help him in relation to the Bill, but it may help in reflection after the Bill has been enacted, as I hope it will be.
First, perhaps I ought to summarise the arguments that I have adduced for rejecting a powerfully argued case. First of all, there is the principle which I put to the Committee and which was not seriously argued against. That is that the principle that all patents should have the some term is an important one. It is not a matter purely of administrative convenience, but it recognises the importance of trying to do justice in the matter of the term as between one branch of industry and another. To accept the logic of the ABPI argument—although it has not been argued at all; the contrary has been argued today—about the maintenance of export earnings and so on may point to a perpetual term for pharmaceutical patents. This has not been pursued by the hon. Gentleman, who was at pains to avoid doing that.
Secondly, if we were to accept the proposals, as things stand at present it would unquestionably undermine the basis on which the consultations with outside interests have taken place. Industry has twice expressed its support through the standing advisory committee for a policy on the term of existing patents which was a compromise between differing views of various parts of industry. We adopted that policy. To give favourable treatment to one sector of industry without the most careful regard for and consultation with the rest of industry, which is bound to take time, would be a very dangerous thing to do.
The hon. Member poured some scorn on the third point that I now make. That is the question of legal and administrative problems that might arise if one applied the selective approach. Frankly, I am not deeply concerned about that. I think that if the right decision was to provide for some selective form of approach and it led to bureaucratic difficulties, so be it. I raise no particular

objection to that. However, we also have to look at the other side of the coin, which is what sort of problem would spring from inevitable uncertainties which could develop from this position. The problems would affect not only, or even primarily, the Patents Office. I think that they would affect the chemical industry far more widely through the uncertainties that would be created.
Fourthly, it is far from fair to say that the Government have ignored the interests of the pharmaceutical industry. I think that the hon. Gentleman, on reflection, will concede that we have provided for the protection of medical uses of known compounds, in Clause 2(6), in a form of protection which is uniquely available to the pharmaceutical industry. We have not sought to reinstate in the Bill the special compulsory licence provision, which was the old Section 41 of the 1949 Act. It was removed in the House of Lords, and on mature reflection I think that that was a proper decision. We have also provided a 20-year term for new patents and the great majority of existing patents. In that way, therefore, we have met at least part of the case.
In the specific comments that the hon. Member made this morning, he argued substantially the case that I have just dealt with, or tried to deal with, but he raised one or two points that had not been made previously.
On one of the points, he posed the question "Why should successful industry be given special help for three years?" He then went on to talk of a saving of perhaps £100 million to the country, which would be lost if the Bill went through. That argument has never been put to me by the industry. It was only on 19th July that I saw the Chairman of Glaxo and six others, who, significantly, did not raise that argument with me. Certainly the figure was not mentioned. They have raised the question of the possibility of loss of export earnings, but no figure was mentioned.

Mr. Crouch: Is the hon. Gentleman saying that, if the Chairman of Glaxo and representatives of the industry had made those claims, he would have been more receptive to them than he has been when they have come from me? I have made my own research into the matter.

Mr. Davis: I am always receptive to the hon. Gentleman's constructive arguments. He has tried to be helpful. I am merely saying that it is somewhat significant. The fact is that here is a powerful argument, and it is somewhat significant that it was not raised previously.
But that is a figure that has been plucked out of the air. I do not know where the hon. Gentleman has produced it from, what authorises the use of the figure £100 million and what are the ramifications elsewhere. It is not all one-way traffic. This constitutes part of the difficulty in dealing with this matter. There are likely to be serious ramifications in other spheres of British industry, otherwise the objections would not have been raised in the first place.

Mr. Nott: I really do not want to be too controversial at this stage, but what the Minister said was "substantial ramifications in other parts of industry". That is just the point that we were trying to elucidate in Committee. What are these substantial ramifications in other parts of industry? It is that upon which the whole argument turns. We do not know what they are.

Mr. Davis: I have to act on the basis of evidence that is produced to me, and I have no specific knowledge myself about these issues. However, I am advised—this was the point canvassed by the standing advisory committee—that if one were to benefit the pharmaceutical industry in this way, although it is conceivable that there might be some advance in export earnings derived in this way, the corollary, however, was that losses could be derived in other efforts of British industry. There were dangers for British industry in doing that, because there was the possibility of opening up avenues for foreign interests in this country which are difficult to quantify—in fact, I think, impossible to quantify. That is the general point that I am seeking to make.
1.30 p.m.
I now go on to be a little more constructive. I told the hon. Gentleman that I should try to do that. The probable commencement date of the Bill is 1st June 1978. I should not at this stage, on the basis of the inadequacy of evidence available, be prepared to agree to the

amendment. What I am, however, prepared to offer to the whole of industry is that, against the background of a Bill having to be introduced at fairly short notice to ratify the European Patent Convention, I cannot assert that I have all the answers right. I should be an absolute fool if I were to do that in this area of high technology.
If, over the next six months or so, I can be convinced that the case for the pharmaceutical industry is accepted without damage to other industries, if I can be satisfied that the other points that I have elucidated in Committee and here today—points one to four—can be met, I think that, without giving any undertaking or commitment at all, it would be right for the matter to be re-examined, and possibly even for further legislation to be introduced. However, I am bound to tell the hon. Gentleman that it is a case that has to be much more powerfully argued than has been done hitherto.
It is right that the standing advisory committee should investigate this matter deeply in the course of the next few months. The industry should be fully consulted. I am not suggesting that I have any degree of amour proper. If I am shown reasonably to have made a wrong decision, I shall not hesitate to admit that, but, on the evidence that has thus far been adduced, I cannot believe that I have got into that situation.
I cannot promise new legislation, but I think that this is a matter that is deserving of further study. There is an opportunity for such study. Whether that will produce the results that the hon. Gentleman wants, I have no idea of knowing at this stage, but I hope that in the light of that he will feel able to withdraw the amendment.

Mr. Crouch: With the leave of the House, perhaps I may reply to the Minister. I was interested to hear his response to the arguments that I advanced. At one stage he described my presentation of my case as powerful, but at another stage he said that it was not powerful enough. I confess that I have no more guns available this morning.
The Minister has not accepted my amendment, because of his concern for the whole of British industry, and of course as the Under-Secretary of State for Trade he has that responsibility, but


I have sought to put forward my arguments on the basis of the trade advantages to the Government and to the country of what I am proposing. The Minister has not been convinced by what I have said. Nevertheless, he has said that he does not want to shut the door altogether.
The hon. Gentleman remembered at the last moment that he is one of the Ministers responsible for trade matters. I quoted some figures. The hon. Gentleman said that he had not heard them before, and that there was not adequate evidence to support them. I said that if British manufacturers were not able to operate their existing patents for three years, between £50 million and £100 million would be lost on earnings abroad. It is difficult to justify trade figures of the future, but one can look backwards, and I am drawing on the experience of the past.
This industry has earned a good deal of money abroad across the balance of payments. Last year alone the figure was £313 million. I can remember when the figure was only £100 million. The industry is advancing considerably. Only recently the Secretary of State for Social Services, when addressing the annual meeting of the pharmaceutical industry, declared that he was so pleased with its export achievements that he was calling on it to achieve something further, to raise the figure beyond £313 million net profit to this country and to make it £400 million or more.
I believe that the Minister may be losing some of that advantage—be it £50 million or £100 million. I cannot say what it will be, but certainly a substantial figure could be lost across the balance of payments. Copyists will get at these British patents, which are the result of British science, work, technology and investment.
At this last minute the Minister has said that his mind is not closed. We must be grateful to him for that, and I am personally grateful for his statement. I feel, however, that at this last minute he could have made a judgment and come down on my side. Ministers are meant to lead their Departments. I should have liked the hon. Gentleman to lead his Department and say "This is a good argument. It is powerful enough for

me. I think that the hon. Gentleman has sustained his case." However, the Minister wants to look at the matter again, and I am grateful to him for that.
I do no know how the Minitser can do anything to deal with this problem under the Bill unless he accepts the amendment. There is nothing in this measure that will affect any future decision by the courts. They have to go by what is in the Bill.

Mr. Clinton Davis: I tried to make it plain that nothing could be encompassed within the provisions of the Bill. What can happen is that, at the very best from the hon. Gentleman's point of view, because the probable commencement date for the substantive provisions is 1st June 1978, there is time for further mature reflection, but I want the hon. Gentleman to be in no doubt that any changes would need further legislation.

Mr. Crouch: I have a feeling that we may have time in the new Session for a small piece of legislation. I shall have my begging bowl with me. I shall be here as Oliver Twist, asking for a little more. I am sorry that the Minister is not prepared to make this a heyday for me, because this is the first time that I have spoken to him from this Dispatch Box and the House, unfortunately, has not filled up as I had expected it would.
I am grateful for small mercies. I am grateful, too, to know that the Minister will look at this again and that there will perhaps be nine months in which the matter can be considered.

Amendment negatived.

Mr. Nott: I beg to move Amendment No. 49, in page 113, line 1, leave out subparagraphs (3) and (4).

Mr. Deputy Speaker (Mr. Oscar Murton): With this we may take Government Amendment No. 51.

Mr. Nott: These amendments could be closely related to the debate that we have just had on pharmaceutical patents. My amendment has not been tabled solely to meet the difficulties that we have been discussing, but it is relevant to our earlier debate. We are not entirely satisfied that the Government amendment meets fully the point that concerns us, because we are here introducing a new set of laws for patents, and in the process of doing


so are changing a recognised system under the old law.
I am sure that the Government Chief Whip, who is talking to the Minister, would like to know that we are drawing to a speedy conclusion, but I hope that the Minister will listen to my last remarks, because this is an important point. As I understand it, under the old law there was a recognised system that enabled individual companies and persons to apply to the court for an extension of a patent on the ground of inadequate remuneration. One could apply for an extension up to five years, or in an exceptional case there could be an extension of up to 10 years. Under the present system the pharmaceutical industry and other industries have made applications to the court on the ground of inadequate remuneration.
However, under the Bill the full processes available under the existing law will not be available. As my hon. Friend the Member for Canterbury (Mr. Crouch) has pointed out clearly, we are here dealing with existing arrangements by a reform of the law. We do not feel that anything contained in the Bill should be made retrospective or confiscatory of existing arrangements. My serious point to the Minister, to which I know he is listening is one to which we may well ask our noble Friends in another place to return.
The Minister has said that he cannot go along with my hon. Friend the Member for Canterbury in meeting the case of the pharmaceutical industry in the Bill but that he will be prepared to consider new legislation. No doubt he attends what is known as the Legislation Committee—if mentioning the fact that it exists does not breach the Official Secrets Act —and he will know what kind of reception he will have in that Committee if he comes along before June with a proposal to bring in new legislation to amend the Bill. I do not think that he will have a great welcome from his colleagues.
The Minister and I know that the likelihood of either coming to the right decision or getting the legislation through is not very high. Why does he not therefore consider this amendment? It is not intended to be a compromise. I do not suggest for a moment that our amend-

ment will meet the wishes of the pharmaceutical industry, but it will remove a certain retrospective element—I use the term fairly and accurately here—in the new law.
I do not wish to press this amendment today, but I wish to tell the Minister that his Amendment No. 51, to leave out subparagraph (4), does not meet our point, because he intends to leave in sub-paragraph (3). It would have been right and proper, since the case of the pharmaceutical industry in the last group of amendments has not been attached to the Bill, to accept this amendment.
The period for which a patent may be extended, on application to a court, is reduced to four years under the new procedures. The right to go to court because of inadquate remuneration has been effectively reduced. We are asking that it should remain the same in the new arrangement as under the old Act.
The right to go to court because of inadequate remuneration should include the right to apply for an extension for up to five years, or up to 10 years in exceptional cases.
I shall take an example from the pharmaceutical industry. If there is an extremely valuable patent over a particular drug, and this drug is bringing major balance of payments and other benefits to this country, the running out of the patent would allow an Italian pharmaceutical company, for example, to copy us and sell the product in the United Kingdom, as well as being able to compete abroad. I am making large assumptions here, but the result of the Italian firm being able to sell the products in the United Kingdom would be substantially to reduce the remuneration of the British pharmaceutical company, so that its remuneration became inadequate. The pharmaceutical company would then be able to go to court pleading inadequate remuneration and possibly get an extension of up to 10 years if it was an exceptional case.
1.45 p.m.
I do not think that this would meet all the wishes of the pharmaceutical industry, but we could expunge the restrospective and the confiscatory elements from the Bill by accepting the amendment, if not in this House then in the short proceedings that are coming in the Lords.

Mr. Clinton Davis: The policy that we have enunciated in relation to the Bill is that patents should have an unextendable term of 20 years and that the same should apply to new existing patents, those with five years or more of their 16-year term to run.
In so far as the term of old existing patents can still be extended after the appointed day, it therefore seems logical that the maximum extension should not result in a total term of 20 years, otherwise potential competitors of the patentees would be more at risk from an old existing patent than they would be from a new existing patent.
I recognise that there is an argument that the Bill retrospectively and unfairly deprives old existing patents of a potential 26-year term, but so it does new existing patents, to which the amendment does not apply. Therefore the amendment stops short of its own logical conclusion.
I do not want to make an unfair point here. I do not think that the hon. Gentleman is arguing that his amendment is the last word in drafting. In practice, applications for extensions have proved very rare. Not a great deal may turn on this amendment either way. My reason for resisting it is that it has long been announced Government policy that no patents should have a term of more than 20 years after the new Act comes into force and that to make the proposed change at this late stage in the passage of the Bill might work to the disadvantage of those who expected the announced policy to be implemented.
As far as I am aware, this is the first occasion that an amendment having this effect has been moved. It was tabled in Standing Committee—I think it was then Amendment No. 162—but it was not called. That amendment had the same purpose as the present amendment. It is very late in the day, and I think that the logic of the amendment is very dangerous. The same arguments that I have adduced before, about consulting industry, apply to this question. It is not possible between now and further consideration of the Bill in another place, to consult the industry to ascertain the views of those in it. It may be a matter for further reflection by the standing advisory committee.

Mr. Nott: The Minister has made some interesting points, and some of them

are valid. I cannot remember why we did not deal with this matter in Committee. I have to accept that if we were now to accept the amendment it could raise the sort of problems that the Minister mentioned. I confess that I had not appreciated the full implications of the amendment. I believe that it would probably be unwise to press it at this stage. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 51, in page 113, line 6, leave out sub-paragraph (4).—[Mr. Clinton Davis.]

Mr. Clinton Davis: I beg to move Amendment No. 52, in page 113, line 16, leave out from 'to' to second 'and'in line 17 and insert:
'section 25(3) to (5) above'.

Mr. Deputy Speaker: With this it will be convenient to take Government Amendment No. 53.

Mr. Davis: These amendments have the effect of making the conditions under which existing patents will be renewed those of the Bill rather than the corresponding provisions of the 1949 Act. I need not enunciate the reasons.

Amendment agreed to.

Amendment made: No. 53, in page 113, line 19, leave out from 'under' to 'except' in line 21 and insert:
'section 25(3) to (5) above'.—[Mr. Clinton Davis.]

Mr. Clinton Davis: I beg to move Amendment No. 54, in page 113, line 31, after 'shall', insert:
'after the end of that year'.
The amendment is needed to make clear, in relation to new existing patents the term of which is increased from 16 to 20 years, that the provision transforming exclusive licences into non-exclusive licences has effect only after the end of the sixteenth year of the patent.

Amendment agreed to.

Mr. Nott: On a point of order, Mr. Deputy Speaker. We should be happy for the Minister to move the remainder of his amendments formally, if that would be acceptable to the House. We have followed them. I know that other hon. Members wish to carry on with further


business. I shall wish to speak on Third Reading, but we have no objection to the remainder of the Government amendments being taken formally.

Mr. Clinton Davis: I am grateful to the hon. Gentleman for that intimation. We are agreeable if you are content, Mr. Deputy Speaker.

Mr. Deputy Speaker: So be it. I think that the best thing to do is for me to call the numbers of the amendments, and if any hon. Member desires to halt me in the process, I shall be pleased to be halted.

Amendment made: No. 56, in page 114, line 28, at end insert 'for that patent '—[Mr. Clinton Davis.]

Schedule 2

APPLICATION OF THIS ACT TO EXISTING PATENTS AND APPLICATIONS

Amendments made: No. 57, in page 115, line 4, leave out 'The' and insert:
'Without prejudice to those provisions of Schedule 4 below which apply (in certain circumstances) provisions of this Act in relation to existing patents and applications, the'.

No. 58, in page 115, line 8, after '23', insert 25(3) to (5),'.

No. 59, in page 115, line 9, leave out "116 to 121' and insert:
'116(1) to (3), 117 to 122,'.

No. 60, in page 115, line 9, after '130' insert '(2)'

No. 61, in page 115, line 12, at end insert—
'(aa) a reference to a specified provision of this Act other than one of those provisions shall be construed as a reference to the corresponding provision of the 1949 Act (any provision of that Act being treated as corresponding to a provision of this Act if it was enacted for purposes which are the same as or similar to that provision of this Act);'.—[Mr. Clinton Davis.]

Schedule 3

REPEALS OF PROVISIONS OF 1949 ACT

Amendments made: No. 62, in page 115, line 38, leave out paragraph 1.

No. 63, in page 116, line 4, leave out also '.

No. 64, in page 116, line 17, leave out paragraph (g).—[Mr. Clinton Davis.]

Schedule 4

TRANSITIONAL PROVISIONS

Amendments made: No. 65, in page 116, line 35, leave out either' and insert:
'whether to a person entitled to apply for a patent for the invention,'.

No. 66, in page 116, line 36, leave out
'subject to sub-paragraph (3) below'.

No. 67, in page 117, line 1, after 'to', insert 'sub-paragraph (3) below,'.

No. 68, in page 117, line 3, leave out
'paragraph (b)of section 55(5)'

and insert:
'sections 55(5)(b) and 58(10)'.

No. 69, in page 117, line 14, leave out
'subject to sub-paragraph (3) below'.

No. 70, in page 117, line 16, leave out from first 'and' to 'Act' and insert:
',in addition to those provisions of the 1949 Act which continue to apply by virtue of Schedule 1 above, section 70 of that'.

No. 71, in page 117, line 24, after 'to', insert 'sub-paragraph (3) below'.

No. 72, in page 117, line 25, leave out
'paragraph (b) of section 69(2)'

and insert:
'section 69(2) and (3)'.

No. 73, in page 117, line 33, leave out from 'of' to end of line 35 and insert:
'that patent or those privileges or rights'.

No. 74, in page 118, line 18, leave out paragraph 6.

No. 75, in page 120, line 6, at end insert:

'Appeals from court on certain petitions for revocation

10A. Where the court has given judgment on a petition under section 32(1)(j) of the 1949 Act before the appointed day, any appeal from the judgment (whether instituted before, on or after that day) shall be continued or instituted and be disposed of under the old law.'

No. 76, in page 122, leave out lines 1 to 4.

No. 77, in page 122, line 8, at end insert:
'18.—(1) Nothing in the repeals made by this Act in sections 23 and 24 of the 1949 Act shall have effect as respects any such application as is mentioned in paragraph 3(3) of Schedule 1 above.


(2) Nothing in the repeal by this Act of the Patents Act 1957 shall have effect as respects existing applications.
(3) Section 69 of the 1949 Act (which is not repealed by this Act) and section 70 of that Act (which continues to have effect for certain purposes by virtue of paragraph 3 above) shall apply as if section 68 of that Act has not been repealed by this Act and as if paragraph 10 above had not been enacted.' —[Mr. Clinton Davis.]

Schedule 5

CONSEQUENTIAL AMENDMENTS

Amendments made: No. 78, in page 122, line 10, at end insert—

'Crown Proceedings Act1947 (c.44)

1. In section 3 of the Crown Proceedings Act 1947, for subsection (2) there shall be substituted:—
(2) Nothing in the preceding subsection or in any other provision of this Act shall affect the rights of any Government department under Schedule 1 to the Registered Designs Act 1949 or section 55 of the Patents Act 1977, or the rights of the Secretary of State under section 22 of the said Act of 1977."'.

No. 79, in page 122, line 36, at end insert—

'Atomic Energy Authority (Weapons Group) Act 1973 (c.4)

5. In section 5(2) of the Atomic Energy Authority (Weapons Group) Act 1973—

(a) after the first "Patents Act 1949" there shall be inserted "the Patents Act 1977"; and
(b)after the second "Patents Act 1949" there shall be inserted "section 55(4) of the Patents Act 1977".'

'7 Edw. 7. c. 29.
The Patents and Designs Act 1907.
Section 47(2).


&amp; 10 Geo. 6. c. 80.
The Atomic Energy Act 1946.
In section 12, subsections (1) to (7)."

No. 82, in page 123, line 5, leave out from beginning to end of line 7.

No. 83, in page 123, line 8, at end insert Section 16(6)'.

No. 86, in page 123, line 13, leave out from '32' to end of line 19 and insert subsection (3)'.

No. 87, in page 123, leave out lines 22 to 24.

'Fair Trading Act1973 (c.41)

6.—(1) In paragraph 10 of Schedule 4 to the Fair Trading Act 1973 for "Patents Act 1949" there shall be substituted "Patents Act 1977".

(2) After the said paragraph 10 there shall be inserted—
10A. The Services of persons carrying on for gain in the United Kingdom the business of acting as agents or other representatives of other persons for the purpose of applying for or obtaining European patents or for the purpose of conducting proceedings in connection with such patents before the European Patent Office or the comptroller and whose names appear on the European list (within the meaning of section 84(7) of the Patents Act 1977 in their capacity as such persons)."'.

No. 80, in page 122, line 40, at end insert—
'(2) After the said paragraph 10 there shall be inserted—
10A. The services of persons carrying on for gain in the United Kingdom the business of acting as agents or other representatives of other persons for the purpose of applying for or obtaining European patents or for the purpose of conducting proceedings in connection with such patents before the European Patent Office or the comptroller and whose names appear on the European list (within the meaning of section 84(7) of the Patents Act 1977), in their capacity as such persons.".' —[Mr. Clinton Davis.]

Schedule 6

ENACTMENTS REPEALED

Amendments made: No. 81, in page 123, line 3, at end insert—

No. 84, in page 123, line 9, at end insert' Section 22(4) and (5)'.

No. 85, in page 123, line 10, leave out from beginning to end of line 11 and insert—
In section 23(1), the words from "(not exceeding "to" ten years)".
In section 24, in subsection (1), the words "(not exceeding ten years)" and in subsection (7) the words from "but" to the end.

No. 88, in page 123, leave out lines 26 to 28.

No. 89, in page 123, leave out lines 41 to 44.

No. 90, in page 123, leave out lines 45 to 49.

No. 91, in page 123, leave out lines 52 No. to 55.

"9 &amp; 10 Eliz. 2.
The Patents and Designs (Renewals, Extensions and Fees) Act 1961.
In section 1(1), the words from "sub—section (5) "to" "and in". Section 2."

No. 93, in page 124, line 4, column 3, leave out from 'Schedule 1' to end of line 10 and insert
'the entry relating to section 84 of the Patents Act 1949 '.

No. 94, in page 124, leave out lines 14 to 16.

No. 95, in page 124, leave out lines 39 to 45.—[Mr. Clinton Davis.]

Motion made, and Question proposed, That the Bill be now read the Third time.

1.54 p.m.

Mr. Nott: Before making my concluding remarks on the Bill, perhaps I may comment on the personal statement made by my hon. Friend the Member for Bournemouth, East (Mr. Cordle). I know that many of us will be very sorry to see him leave the House. He will do so in the knowledge that he has served the House and his constituents ably and conscientiously over many years.
Having met certain criticisms from a Committee of the House, I am sure that my hon. Friend has behaved honourably in the course of action that he has taken. We shall be sorry to see him leave.
I come now to the Bill. We are glad that the procedures have now been completed in this House. Of course, that is subject to their Lordships in another place not seeking to make further amendments leading to the Bill coming back once more. However, subject to that, we have reached the end of this legislation in the Commons, and we shall all be pleased to see it on the statute book. It is an important item of legislation. The country and, indeed, people overseas have been waiting for this reform for many years.
The Bill has been highly technical. With so many technical, not to say legal, Bills going through the House at the same time, we have been rather stretched in dealing with it. Indeed, with the Criminal Law Bill, the Finance Bill, the Unfair Contract Terms Bill and the Protection from Eviction Bill all lying on the Table in front of me, all of which require a certain professional, if not legal, expertise, it has been unfortunate in one way that we should have been deprived of the services

No. 92, in page 124, leave out line 2 and insert—

of our lawyers in assisting us with this measure. I know that we would have benefited from having some of our legal experts with us to deal with this Bill in the Commons. But possibly we have got through the procedures rather faster than would otherwise have been the case. Perhaps as laymen we have done it almost as competently as the lawyers might have done it with our advice and help. I should point out that I am a qualified lawyer.

The Bill is important. It will bring considerable satisfaction that, after many years, we are bringing our law into line with European practice. I hope that the active and important profession of patent agents will be able to conduct a widening and more extensive business, particularly overseas, which will bring benefits to this country.

I should like once more to say how much assistance the House has had from their Lordships in another place. The Bill started in the other place and was dealt with extremely competently by their Lordships. Indeed, we have had an easy task due entirely to the conscientious, able and competent way in which their Lordships considered the matter in depth. My noble Friends Lord Belstead and Lord Lyle, in particular, worked extremely hard in the Lords. I know that all hon. Members on both sides of the House are grateful to them.

The Patent Office team has worked extremely hard. It would not be appropriate for me to mention any of its members by name. We realise that this has been a difficult period for them. As far as we can see, they have performed extremely competently and helpfully. I thank them.

The only point that I should like to make to the Under-Secretary of State, who has conducted the business in the House with good humour, is that all of us—the outside profession—heve been advised and asked to keep amendments down in number. In retrospect, I think that the hon. Gentleman must agree that that was an odd request for him to make because, throughout the


progress on the Bill, the number of Government amendments have been 100 times those moved by us. On Report hon. Members have put down five amendments, whereas the Government have put down nearly 100. I do not say that in any sense of criticism. Clearly this is a complicated and technical piece of legislation and it was important that the Government should get it right. To that extent, we understand why there have been so many amendments.

One fairly important matter remains outstanding—the question of regional filing offices. I am glad that the Chartered Institute of Patent Agents will be joining in a study of this question. That was quite an important point and I am glad that we had the opportunity of debating it in Committee.

We on the Opposition Benches, who did not have the advice of the experts available to the Minister, were extremely fortunate in having the help of one or two members of the Chartered Institute of Patent Agents, who have worked extremely hard for us. I should like to say publicly, if it is not out of order, that we are grateful, and to mention two people in particular—Mr. Ellis and Mr. Flower, who is the Chairman of the Parliamentary Committee of the Institute of Patent Agents.

Throughout the progress of the Bill the patent agents have stressed the general good rather than the good of their own particular profession. On only one occasion—and that was with the group of amendments requesting that patent agents should be allowed to call themselves European patent attorneys—did they put forward anything that could in any way have benefited their own pro-

fession. I want to say publicly how much we all owe to their help and in particular, how much we owe to the two individuals whom I have mentioned. It is good to feel that we can have this close liaison with experts outside the House when such important and technical legislation passes through Parliament.

2.2 p.m.

Mr. Clinton Davis: I shall not detain the House for more than one and a half minutes, since my Chief Whip is now sitting behind me and this is a dangerous position for a Minister.
I am grateful to the hon. Member for St. Ives (Mr. Nott) for his remarks on the Patent Office and those in industry who have been extremely helpful. I am relieved as well as satisfied that we have almost completed this complex piece of legislation. This is an important Bill. It increases the rights of the employee inventor, and that is extremely important. Above all, it has played a part in creating a new international system for the granting of patents, of which the European patents organisation is the most prominent part. A sufficient number of countries have now ratified the European Patents Convention for it to be brought into force on 7th October, and that is important progress.
I thank my hon. Friends for the contributions that they have made, and I also thank those who have consulted me about this legislation. In practice, it will be seen to be a radical piece of legislation in this important, complex and technical field.

Question put and agreed to.

Bill accordingly read the Third time and passed, with amendments.

ADMINISTRATION OF JUSTICE BILL [Lords]

As amended (in the Standing Committee), considered.

New Clause 1

RECTIFICATION OF THE REGISTER

'In section 82(3) of the Land Registration Act 1925—

(a)after the word "interest", there shall be inserted the words "or an order of the court";
(b)the following paragraph shall be substituted for paragraph (a)—

"(a)unless the proprietor has caused or substantially contributed to the error or omission by fraud or lack of proper care; or"; and

(c)paragraph(b)shall cease to have effect.'.—[Mr. Arthur Davidson.]

Brought up, and read the First time.

2.4 p.m.

The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Oscar Murton): With this we shall take Government Amendments Nos. 4, 5 and 6.

Mr. Davidson: In moving the new clause, with which the Chair has grouped three amendments, I should say that the amendments are entirely consequential upon the new clause being accepted.
I am sure that the subject matter of the new clause is totally uncontroversial and will be welcomed. It follows a recommendation of the Law Commission, and I can assure the House that the Government have had the benefit of consultation with the Law Commission on this matter. As the House will know, one of the objects of land registration is to create certainty as to title in land. From that flows practical benefits with investigation of title and conveyancing is simpler than under the unregistered system.
I do not want to go into the rather complicated history of the Land Registration Acts, but Section 82(1) of the 1925 Act sets out a number of circumstances in which the register may be rectified, at the discretion of the registrar or the court, to correct an error or omission. That discretion is curtailed by

Section 82(3), which is designed to ensure that, in general, the registered proprietor is not disturbed if he is in possession of the land.
Rectification may not be ordered against the registered proprietor in possession unless he has caused or contributed to the error or omission by his act, error or fault, or if the disposition to him was void or if for any other reason it would be unjust not to rectify the register against him. It is clear that this provision, as interpreted by the courts, does not give the proprietor the full protection that he was meant to enjoy. The Law Commission's Working Paper No. 45 suggested that the law should be altered to prevent the proprietor in possession being dispossessed unless he was to blame for the error or unless, on the basis of the hardship test, it was better to rectify the register against him than not do so. This has obtained general approval and will be confirmed in the Law Commission's forthcoming report.
I hope I have said enough to convince the House that this is an important matter and that we should not wait for the Law Commission's comprehensive report. This is a comprehensive proposal which has been welcomed in consultations and I am sure that the House will agree that this hotch-potch of a Bill is a suitable means of correcting the deficiencies in the Act.

Mr. Peter Temple-Morris: I am grateful for the clear way in which the Minister has outlined the new clause. As a lawyer I have had little to do with land, but on behalf of lawyers generally I must say that anything that simplifies this tortuous topic and encourages registration should be commended. There is an aspect of flexibility here, in the way that the courts will have an opportunity of dealing with the matter, which will benefit the system. Therefore, there is certainly no objection to the new clause.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

Clause 18

REGISTER OF COUNTY COURT JUDGMENTS

Mr. Temple-Morris: I beg to move Amendment No. 1, in page 11, line 29, leave out '£30' and insert '£10'.
This is an important amendment, as it has to do with the whole credit industry of this country. As the House will fully realise, we are here dealing with the Register of County Court Judgments, that is, the central registry at Gower Street, and the long-standing practice of enabling the credit industry—and it is an industry—access to that register in order to list bad debts of £10 and more.
In moving the amendment I cannot be completely brief but I shall at least be succinct, because there was a full discussion of this matter in Committee. During that discussion there was a certain amount of criticism from both sides and the Minister charitably and properly undertook to consider the matter and to see whether the figure of £30 should remain in the Bill, whether there should be another figure, or whether we should go back to the status quo of £10 and upwards. I can be succinct, not least because the ball is in the Minister's court. He has undertaken to consider the matter and the House awaits the result of his consultations. I thank him for including the Opposition in those consultations.
The background to the proposal is that it began with the somewhat bureaucratic inclusion in the Bill of the abolition of this access to the register, on the ground that it was an interference with the rights of the individual that anyone should be able to inquire into the means, defaults and debts of others. That proposal attracted much criticism, with the net result that by the time the Bill was presented in the Lords the figure had been changed from £10 to £50. Again, there was a storm of understandable criticism, and the figure was dropped to £30. We are now asking the Government to restore the status quo. In putting this proposition to the House, I want to deal with the Government's grounds for keeping the clause as it now stands and the Government's defence so far.
The question of total abolition began, perhaps, as a matter of individual rights, but once a figure of any kind was inserted, two main grounds only, the ground of principle having gone, were advanced to the House. They were both somewhat dubious. The first of these two grounds was the question of saving to the Government. It was difficult to quantify the saving. Some detailed

argument took place in Committee about the amount that could be justified as a saving.
The Attorney-General advanced the figure of £100,000 as being a saving, mainly on the wage costs of staffing registries, but one could negative such a cost in that the loss to one menswear company would probably be in excess of £100,000. In addition, there is the possibility of costs being indirectly increased by the legislation through price increases if the cost of such debts were passed on to the consumer, as they inevitably are, and through the loss of registration fees being paid by agents seeking information.
The second ground was equally light —that there has been considerable inflation since 1852. That is hardly relevant. The sum of £10 then was a considerable amount of money, and there was then hardly the credit industry that there is today. The register is fulfilling a major modern function.
The first and overwhelmingly strongest reason for the amendment is that it is concerned with the efficient operation of the credit industry. In mentioning the credit industry, one is talking not just of those who lend money but of those who borrow it. In these terms, we are dealing with many ordinary people whose access to credit involves their access to a better life. We are concerned that the less well-off, who need credit for essential things like clothes, would be most likely to be hit by this measure. The Minister might feel inclined to agree to that proposition.
Secondly, we are greatly concerned with the results of the clause. We feel that less credit will be offered. Here again we are dealing with needy people and their standard of life. We feel that this is a much greater threat to the freedom of the individual, his liberty, his rights and his privacy through what could be much less reliable checking if alternative sources had to be used instead of the official register.
If the clause remains unchanged there will be little accurate control. All sorts of unofficial efforts will be made to check people's creditworthiness. For example, there will be monitoring of certain courts in certain areas and not others. The result of such a random selection of those to whom one lends will


do great harm to the individual, not least to those who do not deserve it and can least afford it.
Finally, there is the social responsibility involved in checking credit—and it is a social responsibility. I say that advisedly and deliberately. There is a responsibility on the House to check the lending of money to those who borrow beyond their means, or to ensure that it is checked. Much harm is done if people get used to doing that. The figure of 250,000 defaulters has been mentioned as the number of those who will come off the list if the clause remains as it is.
2.15 p.m.
We look forward with interest to what the Minister has to say. We are grateful to him for having undertaken further to consider the matter. I hope that after the war of attrition that has gone on outside this place, in the Lords, and now here, we can happily go back to the status quo.
If the clause remains as it stands, and even with the amendment, there still will remain with the Government the right to prescribe a figure other than £10. I urge a word of caution. Were any effort made to prescribe a figure other than £10 we would view the matter extremely seriously. We expect the fullest possible consultation to go on outside this place before we ever get to that stage. We know that we have the power to block such a measure by resolution of the House. It is a power that we would not hesitate to use.

Mr. Arthur Davidson: I am grateful to the hon. Gentleman for the manner in which he moved the amendment. He did it in such cordial terms that I want to put his mind at rest at once and assure him that the Government are prepared to accept the amendment. As he rightly said, this matter was debated at some length in Committee, where it was clearly the view of those who spoke, on both sides of the Committee, that the figure should remain as it was—£10—before the clause was introduced.
As my noble Friend the Lord Chancellor said in another place, in maintaining the register of very small judgment debts down to the value of £10—it has been £10 since 1852—a substantial and concrete service is provided to the comer-

cial community, certainly greater than was contemplated in 1852. Even though the register may be financially self-supporting —and I accept that it can be, through fees charged for inspection, which can be raised if necessary—it takes resources, including manpower, to monitor it, and at a time when everyone is concerned about cutting Government expenditure, or at least seeing that it does not increase—and the Opposition are as concerned about that as much as anyone else—my noble Friend took the view at the outset that the manpower could be used in a more productive way than in maintaining this register.
In pursuit of this aim, and also because of the implications that the hon. Gentleman rightly pointed out, my noble Friend was at one time minded to propose complete closure of the register, but eventually decided against that course. Instead, an increase of the qualifying figure from £10 to £30 seemed to the Government to be an entirely reasonable step, and, indeed, the minimum step that could be taken to acknowledge the fall in the value of money over the years, certainly since 1852.
Although I am happy to accept the amendment, I must tell the hon. Gentleman that the Government do not go back on that view. But in the light of the forceful arguments put to the contrary, and of the arguments put, quite properly, by the commercial interests which provide credit facilities, about whose value to the community I do not disagree, the Government feel it proper to accept the amendment.
As the hon. Gentleman rightly says, the clause, even with the amendment, will leave my noble Friend power to increase the £10 figure by statutory instrument if, at some future date, it appears to him expedient and proper to do so. I assure the hon. Gentleman that that would be done only after proper consultation with all those concerned—commercial interests and others—and it would, of course, require approval of the House under the negative resolution procedure. But that is all in the future, perhaps some time in the distant future. For the present, I am happy to say that the Government are prepared to accept the amendment.

Amendment agreed to.

Clause 31

CITATION ETC.

Amendments made: No. 4, in page 19, line 22, leave out from beginning to '25' in line 23 and insert
'sections [Rectification of the register] to'.

No. 5, in page 20, line 1, leave out 24 'and insert [Rectification of the register]'.—[Mr. Arthur Davidson.]

Schedule 5

REPEALS

Amendment made: No. 6, in page 38, line 3, at end insert—
'15 &amp; 16 Geo. 5 c. 21 Land Registration Act 1925. Section 82(3)(b)'.—[Mr. Arthur Davidson.]

Order for Third Reading read.

[Queen's Consent, on behalf of the Crown and Prince of Wales's Consent, on behalf of the Duchy of Cornwall signified.]

2.20 p.m.

Mr. Arthur Davidson: I beg to move, That the Bill be now read the Third time.
This is a useful, if hardly revolutionary, Bill which makes some welcome changes in the administration of justice. I welcome it and commend it for Third Reading.

2.21 p.m.

Mr. Temple-Morris: I concur with what the Minister has said. These Bills, which are regular features and involve the use of lawyers on both sides of the House, at least give us a chance to discuss many interesting matters. Many would agree that most of our interesting discussions were about matters which do not appear in the Bill. At least the Bill gives us the chance to air matters which are prospective candidates for inclusion in these measures in the future. To that extent, all of us on the Opposition side of the House who have been concerned with the Bill have appreciated the value and the unpolitical, bipartisan and constructive spirit in which it has been carried through all its stages.

2.22 p.m.

Mr. Anthony Kershaw: I am happy to join my hon. Friend the

Member for Leominster (Mr. Temple-Morris) and the Minister in welcoming the Bill in the form in which it has arrived. It deals with widely disparate subjects. Therefore, I make no apology and hope that I shall not incur criticism from you, Mr. Deputy Speaker, for referring to only one part of it. If I referred to the whole of it my speech would be long and tedious.
I refer to Clause 23. I was disappointed at the reply of the Minister in Committee when I raised several points connected with Clause 23. I make no attack on the courtesy of the Minister. He dealt with the matter very succinctly. But we were on that occasion up against the question of time and it was not possible for him to give me the kind of reply which he otherwise might have done. Nevertheless, the problem with which we were then dealing could not be fully ventilated, and I therefore now call attention to one or two items related to it. Clause 23 deals with the abolition of traditional courts, with some exceptions. The exceptions are not long enough or broad enough.
In my constituency there are two contiguous commons, Minchinhampton and Rodborough, which are extensive in size, totalling nearly 1,000 acres. For a long time there have been no problems about running them. The Bill now seeks to abolish the manorial courts connected with them just at the time, unfortunately, when the problems connected with running areas such as these have become more serious.
For a long time, since the decline of agriculture in the eighteenth century, there was no particular pressure on the commoners either to exert their rights or to see them enforced. The value of the beasts grazing on the commons was very low. The grazing was not particularly valued by those who had the right to it, and nothing really transpired to cause any difficulty. Now, the situation is utterly transformed, and problems continue to mount. The value of the land in the 1930s was, I suppose, around £5,000, but now, with the rise in the value of land and in the value of grazing, it could be set in a free market at about £500.000. The animals on it, from 700 to 800 beasts of all sorts, are worth perhaps £150,000. The commons have become big business.
As the value of the commons rises to those who have rights on them, so does the threat to them. These comons are surrounded by housing and developments of various sorts. An important main road runs through the middle and there are numerous other roads which are heavily used. The commons are widely used for recreation, with all the attendant difficulties of crowds and motorists. In this case the sort of dangerous litter that is left behind can damage the stock. In order to control the situation we have regulations, which up to now have hardly been challenged. But they are being challenged, for what reason I do not know. I presume that the increased value of the rights is such that people are very keen to obtain them.
For example, cattle and horses are turned out in the winter on the common, which is against the regulations and is very dangerous. Accidents happen, some of them fatal. I was late for my adoption meeting for the General Election of February 1974 because of an accident on the common which held me up and in which, unfortunately, a constituent was killed after running his motor cycle into a horse in the darkness.
As I pointed out in Committee, because of these pressures and because of the desire to improve the grazing which is now so valuable, it will be necessary in the future to fence. Without going into the legal and financial arguments which I deployed in Committee, there are considerable legal and financial problems about fencing. Some kind of organisation to overcome these is necessary, and the manorial court could provide it.
We need now to settle on an enforced new regulation. No fair-minded person can differ from the view that the need exists. Nor could he deny that the manorial court is capable of seeing the regulations enforced. "But", said the Minister in Committee, "your courts are obsolete". It is true that the courts have not met since 1912, but the regulations which were laid down and approved have been enforced ever since and have been observed, until very recently.
For many years there has been no murder in the village in which I live, but I dare say that the crime has not been abolished in that village. In the Isle of Man I understand that there are no

offences of rape. I cannot think why. I dare say that the crime still exists in the Isle of Man. There has been no prosecution for blasphemy for 50 years until the successful prosecution last week. Why is that so? Because the regulations have not been challenged up to now, does the Minister say that they have lost their validity? It is only when they are challenged that we need a court. It is ludicrous to say that because the regulations have not been defied there is no need for them. It is only now that the regulations are being defied that we need the court. No public expense is involved. The whole exercise smells of bureaucratic and unnecessary meddling.
Unfortunately, in sweeping out some of the anomalies, which I agree exist in these courts, useful provisions have been swept out too. Now, the Government are too bureaucratically obstinate to change their mind. What is particularly irritating is an attempt—perhaps I put it too high—by the Lord Chancellor to say that it is all our fault. He wrote to me on 6th July and said:
At the conclusion of the preliminary consultations the Law Commission formulated provisional proposals in an explanatory memorandum completed in April 1974, which was widely circulated to everybody who might be affected.
That is, on the face of it, completely untrue. How could a memorandum like that be circulated to everyone affected? Certainly that was not done. The letter goes on to say:
In addition, notice of the proposals was also given under the heading Manorial Courts' in the Journal of the Commons, Open Spaces and Footpaths Preservation Society for the autumn of 1974".
Members of Parliament have a great deal of reading to do, and we read a certain amount of esoteric literature. I very much doubt whether, either in this this House or in many parts of the country, one of the most popular weekend journals is that of the Commons, Open Spaces and Footpaths Preservation Society. It could easily escape attention.
Finally, the letter from the Lord Chancellor says that all should have been made clear by a letter from Mr. Ian Campbell, the Secretary to the Society for Footpaths Preservation, which appeared in the correspondence columns of The Times on 27th December 1974.
I do not know what you were doing on 27th December 1974, Mr. Deputy Speaker —

Mr. Deputy Speaker: I plead not guilty.

Mr. Kershaw: Perhaps in Scotland the question would not arise. However, in this country a large number of people would not have been concentrating as much as they should have been on the correspondence columns of The Times, particularly on those matters relating to footpaths, on 27th December, the day after Boxing Day.
It is unfair of the Lord Chancellor to imply that it was due to idleness or lack of attention on the part of those responsible that these courts have been left out of the list. I say that there is a necessity here, a cause which has to be met, and it is a pity that we are not given the tools to do the job.
The Lord Chancellor's letter goes on to say that, although it is not really for him to say,
I have no reason to suppose that the ancient courts leet are more effective than the management committees as a means of regulating the use of common land.
I would agree with that, provided that everyone else was prepared to go along with that sentiment too. Up to now we have had no difficulty. We arc now experiencing difficulty. There is no doubt that, if someone wishes to say to the voluntary management committee that he does not wish to obey its regulations, the committee has no means of enforcing them. It is a great pity that this has not been conceded.
Under the Bill, the Lord Chancellor may appoint other courts and make regulations for other courts to enforce the regulations which a manorial court would be able to enforce. As we now have no voluntary acquiescence, or not enough, to run these commons properly, I hope that the Lord Chancellor will give his early attention to this question of laying down which courts can enforce the rules agreed upon by the management committee and in what circumstances. I do not know how those regulations will be drawn. Certainly, to enforce them in some kind of court people will be put to

expense, which would not have been the case with a manorial court. Any other court will be more formal, and it might be more difficult to bring such cases before it. This is very much a second-best solution. If the manorial court is not to act, I hope that the Lord Chancellor will see that he makes regulations without delay so that the appropriate court can act.

2.35 p.m.

Mr. Arthur Davidson: I feel that I ought to answer one or two of the points that the hon. Member for Stroud (Mr. Kershaw) has raised. He has pursued this matter with great ingenuity and persistence both in Committee and today. He does it with such charm and in such a lyrical and colourful way that I always feel bad about having to turn him down. I cannot offer him any further encouragement today. His proposals are inconsistent with the underlying purpose of the Law Commission's proposals, which, in effect, say that an obsolete court should not be capable of revival. As the hon. Member knows, the Law Commission's object was to abolish the judicial functions of all these ancient courts, useful as they may have been at one stage, but to keep in existence any court performing a useful function. The courts of Minchinhampton and Rodborough, which the hon. Member has in mind, have certainly fallen into disuse, because they have not been used since before the First World War.
If we were to accede to the charms of the hon. Gentleman in this case we would quite clearly be opening up the possibility which the Law Commission's proposals were designed to prevent, of allowing further attempts to be made to revive other ancient courts. Confusion would abound. That would not help with the administration of justice. I praise the hon. Member for raising this matter with such consistency. However, I have to turn him down. I can tell him that the Lord Chancellor will note carefully what he says. His words will not be lost.

Question put and agreed to.

Bill accordingly read the Third time and passed, with amendments.

NORTHERN IRELAND (EMERGENCY PROVISIONS) BILL [Lords]

Order for Second Reading read.

To be read a Second time upon Monday next.

EMPLOYMENT PROTECTION BILL [Lords]

Read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Graham].

Committee upon Monday next.

PROTECTION FROM EVICTION BILL [Lords]

Considered in Committee.

[Sir MYER GALPERN in the Chair]

Clauses 1 and 2 ordered to stand part of the Bill.

Clause 3

PROHIBITION OF EVICTION WITHOUT DUE PROCESS OF LAW

Amendment made: No. 1, in page 3, line 4, leave out 'Rent Act 1968' and insert 'Rent Act 1977'.

Clause 3, as amended, ordered to stand part of the Bill.

Clauses 4 to 7 ordered to stand part of the Bill.

Clause 8

INTERPRETATION

Amendment made: No. 2, in page 6, line 32, leave out 'Rent Act 1968' and insert Rent Act 1977'.—[Mr. Arthur Davidson.]

Clause 8, as amended, ordered to stand part of the Bill.

Clauses 9 to 13 ordered to stand part of the Bill.

Schedules 1 to 3 agreed to.

Bill reported, with amendments; as amended, considered.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing OrderNo. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed, with amendments.

RENT BILL [Lords]

Considered in Committee.

[Sir MYER GALPERN in the Chair]

Clauses 1 to 17 ordered to stand part of the Bill.

Clause 18

REGULATED TENANCIES

Amendment made: No. 1, in page 11, line 17, leave out '20(3)' and insert '24(3)'.—[Mr. Arthur Davidson.]

Clause, as amended, ordered to stand part of the Bill.

Clauses 19 to 54 ordered to stand part of the Bill.

Clause 55

GENERAL PROVISION FOR PHASING OF RENT INCREASES

Question proposed,That the clause stand part of the Bill.

2.41 p.m.

Mr. Bruce Douglas-Mann: On Second Reading I raised the question whether this clause involved a substantive change in the law and whether it was appropriate that such a change should be made in a consolidation measure. I submitted that the insertion of the words:
or part of a statutory period
in subsection (1)(a)involved a change in the law.
My hon. Friend the Minister will, I am sure, agree that this is certainly a change from the corresponding provisions of the Housing Rents and Subsidies Act 1975. I understand that the reason for the alteration is to enable the phasing provisions of that Act to operate in the middle of a rental period after the registration of the rent has taken effect and that it is no longer necessary, as would have been the


case under the Housing Rents and Subsidies Act, to defer the implementation of the phasing provisions until the beginning of the next rental period.
I understand that as a consequence of the Avenue Properties case it has now been held that under the Rent Act 1968 it does not prevent a notice of increase coming into effect forthwith when it is subject to the time-lag period of four weeks, notwithstanding that the date that it comes into effect is not the beginning of a rental period.
The contention has been raised with me —I felt it proper to raise it in the Committee—that we are making the Bill accord with the Avenue Properties case and substantively changing the provisions of the Housing Rents and Subsidies Act 1975 so as to enable rent increases to come into effect at an earlier date than they otherwise would have been allowed to do.
The effect of the Avenue Properties case on the Rent Act 1968 is that a notice of increase can come into effect at any time whether it is at the beginning, the middle or the end of a rental period. I feel that that is an extremely unsatisfactory decision on the part of the Court of Appeal. It goes completely contrary to the whole trend of common law, and I submit that it is contrary to the requirements of the Rent Act itself.
It could well be that at a later date the House of Lords will reverse the decision in the Avenue Properties case and we shall be left with changes in substantive law which have been made to take account of a Court of Appeal decision that is exceedingly dubious.
I appreciate that if the change relates only to the phasing provisions it does not affect the provisions relating to the time of the original notice of increase. I would put on record that by making this change we are merely ensuring that the phasing provisions of the Act come into force at the same time as the notice of increase. By this change we are not facilitating earlier increases in rent; on the contrary, we are ensuring, as I now believe to be the case, that there will be a considerable degree of difficulty if we are simply facilitating the earlier implementations of rent increase.

The Parliamentary Secrtetary to the Law Officer's Department (Mr. Arthur Davidson): Mr. Deputy Chairman, Sir Myer—

The First Deputy Chairman: "Deputy Chairman" is good enough.

Mr. Davidson: Mr. Deputy Chairman, Sir Myer, and all the rest, my hon. Friend raised this matter on Second Reading. He has done a useful service in doing so. I do not want to encourage my hon. Friend in case he finds other obscure and erudite points to raise. But this is a matter which the Law Commission, the Joint Consolidation Committee and the Legal Departments of both the Department of the Environment and the Lord Chancellor's Office considered carefully.
My hon. Friend's interpretation is correct. Perhaps I can briefly say that when the phasing was drafted the view was taken that the notice of increase served under Section 22 of the Rent Act could not take effect from a date in the middle of a rental period. It was assumed that the phasing provisions were drafted to bite only on rental periods beginning during the period of delay. Nothing was said about what would happen should a notice of increase be served to take effect during a rental period which had begun before that date.
The Avenue Properties case, however, has put a rather different complexion on this. Those administering the system thought that the rental period could not be split, but that was wrong. It was considered that the validity of a rent increase subject to phasing was concerned with a notice of increase generally—one served under Section 22(2)(b)of the Rent Act 1968. Since then it has been unclear how phasing rules operate in relation to a period beginning with the period of delay and whether a landlord is entitled to serve notice of such a period subject to the phasing provisions.
As my hon. Friend will realise, if the Law Commission recommendation had not been put into effect in the Bill a landlord, for the period before the period of delay—it might be lengthy or short—might have raised the rent to the maximum before the phasing period operated. We would therefore have one period where the rent would be the maximum


before the phasing started. That would clearly be an anomaly and an absurdity, and could possibly lead to unnecessary litigation.
I can tell my hon. Friend that there are comparable phasing rules in Schedule 5 of the Rent (Agriculture) Act 1976. That Act applies to tied cottages. Parliament there took into account the Avenue Properties case. The phasing rules under that Act are made to bite on any period of the tenancy that falls within the period of delay. To have that Act saying one thing and the general Rent Act saying another would also be an anomaly
I hope that my hon. Friend is satisfied that on balance it is correct that the Law Commission recommendation should be carried into effect in the Bill.

Question put and agreed to.

Clause 55 ordered to stand part of the Bill.

Clauses 56 to 96 ordered to stand part of the Bill.

Clause 97

INTERPRETATION OF PART VI

Amendment made: No. 2, in page 69, line 47, after housing', insert 'association'.—[Mr. Arthur Davidson.]

Clause 97, as amended, ordered to stand part of the Bill.

Clauses 98 to 155 ordered to stand part of the Bill.

Clause 156

SHORT TITLE, COMMENCEMENT AND EXTENT

Amendment made: No. 3, in page 102, line 15, leave out subsection (4).—[Mr. Arthur Davidson.]

Clause 156, as amended, ordered to stand part of the Bill.

Schedules 1 to 13 agreed to.

Schedule 14

CONVERSION OF HOUSING ASSOCIATION TENANCISE INTO REGULATED TENANCIES

Amendment made: No. 4, in page 146. line 17, leave out section 93 of this Act' and insert
'section 87 of the 1972 Act'.—[Mr. Arthur Davidson.]

Schedule 14, as amended, agreed to.

Schedules 15 to 22 agreed to.

Schedule 23

CONSEQUENTIAL AMENDMENTS

Amendments made: No. 5, in page 176, line 26, leave out 'contract' and insert 'letting'.

No. 6, in page 176, line 30, leave out 'contract' and insert 'letting'.

No. 7, in page 176, line 47, leave out 'contract' and insert 'letting'.

No. 8, in page 177, line 20, leave out 'contract' and insert 'letting'—[Mr. Arthur Davidson.]

Schedule 23, as amended, agreed to.

Schedule 24

TRANSITIONAL PROVISIONS AND SAVINGS

Amendment made: No. 9, in page 188, line 13, at end insert—
'20A. Subject to the provisions of this Act, any reference in any document or enactment to a Part VI letting (within the meaning of Part II of the Housing Finance Act 1972) shall be construed, except in so far as the context otherwise requires, as a reference to a restricted letting (within the meaning of Part II as amended by this Act).'.—[Mr. Arthur Davidson.]

Schedule 24, as amended, agreed to.

Schedule 25 agreed to.

Bill reported, with amendments; as amended, considered.

Motion made, and Question,That the Bill be now read the Third time,put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed, with amendments.

IRON AND STEEL (BORROWING POWERS)

2.53 p.m

The Minister of State, Department of Industry (Mr. Gerald Kaufman): I beg to move,
That the draft Iron and Steel (Borrowing Powers) Order 1977, which was laid before this House on 7th July, be approved.
The maximum amount of money which the British Steel Corporation may raise by way of borrowing and advances of public dividend capital was last revised just a year ago by the Iron and Steel (Amendment) Act 1976. The limit was then set at £3,000 million, but the Secretary of State was given power to make increases by order, subject to affirmative resolution by this House, up to a maximum of £4,000 million. The order, which I now invite the House to approve, makes full use of this power.
Last April, when he opened the debate on the Second Reading of the Bill which became the 1976 Act, my right hon. Friend indicated that the full amount of the increases proposed in the Bill should last the Corporation up to three years. So hon. Members might then have expected that we would be considering an order under the Act towards the end of this financial year rather than before the Summer Recess. However, the signs of an upturn in world steel markets, which appeared briefly in the early part of last year. were not sustained; steel remains in the grip of the longest and most severe depression that any of those currently engaged in the industry have had to face.
The Corporation's annual report and accounts were published on 19th July. We deliberately delayed this debate so that hon. Members might have that document in their hands. The report and accounts show that the Corporation's hopes of breaking even in 1976–77 after a loss of £225 million in 1975–76, were disappointed. But in the circumstances the loss could well have been appreciably worse than the £95 million actually incurred last year, had not the Corporation taken energetic action in response to a very difficult situation. It required external finance counting against the limit of £894 million. After making the necessary adjustments this exactly matched the £950 million cash limit.
The total amount charged against the borrowing limit at the end of the year was £2,285 million. When estimated requirements for 1977–78 are added to this figure, it seems probable that the Corporation will effectively run up against the present limit towards the end of 1977. Latest estimates of future financing requirements are contained in the statement published by the Corporation with its report and accounts, fulfilling the undertaking by my noble Friend Lord Melchett in another place on 28th July last year. These estimates suggest that £4,000 million will last until the spring of 1979, some months earlier than the Corporation originally expected.
The Corporation expects demand to improve in 1978–79, with a consequent effect on trading results, leading progressively to the elimination of the revenue deficit, shown at £247 million on the 2nd April balance sheet, and then to a return to dividends on PDC.

Mr. Tim Renton: Has the BSC any finite reasons for expecting demand to improve in 1978, in the period that the hon. Gentleman has just mentioned, or is it rather that it cannot see any improvement during the current year, which I understand, and is therefore optimistically hoping for an improvement next year?

Mr. Kaufman: Clearly, there is no utterly definable reason that one can provide for such an expectation. The hope is that the upturn that is taking place will assist the Corporation. As the hon. Gentleman will appreciate, the reason why we now face a £95 million loss compared with the break-even that we expected when the Bill was going through last year, is that the recession has been much more severe and long-lasting than was expected. Therefore, I do not think that the Corporation could commit itself to a firm promise that that would happen, but it is its serious indication. As the Chairman in his public statement this week has not sought to put a gloss on the current very serious situation, I do not think that he is indulging in over-optimism.
In any case, it would be misleading to suggest that the return to an adequate level of profitability will be other than slow. In these circumstances, and also taking account of the capital expenditure


needed to secure the Corporation's viability in the longer term, the real return on resources invested in the BSC over the next five years looks like being small. Over this period it will have an average of about £1,000 million of assets tied up in projects under construction earning no revenue, but giving rise to interest charges.
In current circumstances it is difficult now to set a meaningful financial target for the Corporation to replace the one which expired at the beginning of April. Clearly the BSC's first objective must be a return to profitability, and I look to it to make substantial progress towards this in the light of the higher levels of demand which are expected by the end of this financial year. During the course of this year, the Government will be discussing with the Corporation a positive target to run from the beginning of the 1978–79 financial year which will be both realistic and challenging.
Because of present and prospective demand levels it has become necessary to slow up the overall development programme compared with that envisaged in the 1973 White Paper.

Mr. Michael Marshall: Before the hon. Gentleman leaves the question of the rate of return, may I say that he has announced, in effect, that, pending the discussions, he will not set a new target? However, will he confirm that, taking one year with another, as a minimum target he will expect the Corporation to break even, in accordance with the pressure from the Government?

Mr. Kaufman: I should not like to anticipate the outcome of our discussions with the Corporation, but I make it clear to the hon. Gentleman that we expect it to return to profitability. We expect a return on the public investment. I should not like to lay down the basis of it, but the fact that we are imposing, and are continuing to impose, very stringent cash limits shows that we want a regimen of discipline. Sir Charles Villiers has never made any secret of his acceptance of that.
Sir Charles has indicated that development must now be related to a 15-year-plus rather than a 10-year strategy. To make adequate use of the capacity already available and to which the Corporation is firmly committed to bring on stream

over the next five years, the Corporation will have to export between one-quarter and one-third of its production.
In all, the BSC now expects to invest some £3,600 million at current prices over the next five years, of which about £600 million will be spent this year. Even so, it represents a cutback in capital expenditure of some £225 million at out-turn prices in 1977–78 over the amount that the BSC planned when making last year's borrowing forecast. A reduction of a similar order is being made in 1978–79. The Corporation has explained that the reductions are being made by deferring starts on new projects rather than by slowing down those already under way.
It would perhaps be helpful to the House if I were to refer to a particular new project about which I can provide hon. Members with some information. Last year the Corporation proposed a 2 million tonnes plate mill. It has reviewed this in the light of developing demand prospects and has drawn up plans for a new plate mill in the North-East of England with a capacity of just under 1 million tonnes per annum and a cost of approximately £250 million at current prices. This will eventually replace other obsolescent plant. There have been extensive consultations between the BSC and the unions on this matter. The location remains under discussion.
The Corporation is now satisfied that a new mill represents the best and most economical way of establishing the basic capability to meet likely demand for high-quality plate, much of it with larger dimensions than are now available, until well into the 1990s. It will strengthen its international competitiveness in this important product area. We have given our agreement in principle to this development, which is fully consistent with the European Commission's proposals for restructuring the Community steel industry.
Although new investment accounts for a substantial part of the BSC's financing requirement in the current year, working capital items are also important. The Corporation intends to hold on to the counter-cyclical stocks accumulated last year and the year before, but is giving the closest attention to holding working stocks at a level appropriate to the forecast of sales for the remainder of this financial year. Even after taking account


of economies in investment and working capital, it has been necessary to fix the BSC's cash limit for 1977–78 at £950 million. This is the same as last year, and takes account of the need to finance the plant closure programme. Both we and the Corporation regard the £950 million as an absolute limit within which it must operate, even if the trading outturn proves worse. The limit means that by next April there should be approximately £3,200 million charged against the borrowing limit.
It is against this background and very real discipline that the Government are prepared to meet the BSC's essential financial needs. Subject to further review of the BSC's financial position and prospects, and to Parliament voting the necessary money, our intention is to continue making public dividend capital available in the proportion of 55 per cent. of the Corporation's additional financial requirements other than short term, and also to provide loans as necessary from the National Loans Fund towards the balance of those requirements.
In order that we may continue with our policy, I ask the House to approve the order and so allow the Corporation to continue its progress towards becoming the well equipped, technologically advanced, and highly competitive steel producer that the country needs.

3.5 p.m.

Mr. Norman Lamont: It is the custom either on a Friday afternoon or late at night to observe what a pity it is that a vital and important subject is being debated at a time that is not of maximum peak viewing and listening. That cliché matches today's reality.
It would be difficult to over-emphasise the importance of the order either to the Steel Corporation or to our national economy. The demands of the Corporation in terms of borrowings from the Exchequer and of commitments on our national resources represent a large and important issue.
The debate is taking place against a bleak background. We have just had the announcement by Sir Charles Villiers of the £95 million loss by the Corporation this year. He has indicated that the loss

in the current financial year could be about £250 million.
Today and in the Press, we have heard a fairly well rehearsed litany of the special factors involved. There are market conditions: over-supply in the world and a falling off in demand. There is also the imposition of an incomes policy which has made it more difficult for the Corporation to implement its productivity schemes. One might add a third factor which has been important—political interference. Decisions have been imposed upon the Corporation to keep open out-of-date Beswick plants at a cost of £65 million a year. Added to that we have had vacillation over Shotton and Port Talbot which imposed further losses on the Corporation.
Even making allowances for those factors, the results are extremely disquieting. I do not deny that the industry is facing a difficult situation internationally. Perhaps the grimmest statistic is Sir Charles's warning that the Corporation has no chance of breaking even unless it can sell 24 million tons of steel a year. I do not think that it has much chance in the foreseeable future of selling that amount. It sold 20 million tons last year, and the outlook for reaching 24 million tons is bleak.
Of course, there are special factors and the international outlook is grim. That is no reason for uncritically saying that we can avoid hard decisions or, without asking questions, uncritically saying that the investment programme must go ahead as originally envisaged. Nor is it an argument for saying that the Corporation should not have imposed upon it stern financial disciplines.
The money about which we are talking in order to modernise the Corporation represents a large proportion of our resources. In the past year the capital requirement of the Corporation was 8 per cent. of the public sector borrowing requirement. That type of demand on national resources can be justified only if there is a real prospect of a positive return on the money involved. There is no other way of looking at the Corporation's results.
It is alarming that the Government should have to come to the House today asking for a further increase in the borrowing powers of the Corporation. This


increase comes almost 12 months ahead of the date that we were told the existing powers would run out. Soon we shall have had requests for £1 billion in 1975, 1976 and 1977. We are now told that the present limit for borrowing will last until the spring of 1979. However, in view of the way in which previous estimates have turned out to be so inaccurate and have been so quickly overturned by events, what real confidence can anyone have that the estimate of the present borrowing requirement will be any more reliable?
I am afraid that the uncertainty has been increased by the fact that the Minister of State has not today really been able to give any assurance about action that the Government or the Corporation intend to take. For a Government addicted to initiatives, strategies and plans, it is amazing that nothing has been announced today.
In spite of the mitigating factors for the performance of the Corporation, the way in which the performance has turned out in the past two years is deeply disappointing. There is no other way of looking at it. Its share of the market has now dropped to just over 56 per cent. That is 4½ per cent. up on the share two years ago, but it is very far below the market share that the Corporation had at the start and what the Corporation ought to have now, and it is very far below the level about which Sir Charles has been talking.
Of course, we understand that in an international recession export markets will be lost and that it will be much more difficult to compete in export markets. But what is more difficult to take is the fact that the Corporation has performed so badly in its own domestic markets. There is no way of avoiding the conclusion that a large part of the responsibility for that lies with the Corporation, in its poor performance and poor delivery. This has happened through "a failure to deliver reliably and regularly to customers". If anyone thinks that I am being hard on the Corporation, those are not my words but the words of the chief executive of the Corporation. Therefore, the performance of the Corporation to its customers must be considerably improved.
The timing of this debate would have been a little unfortunate if it had occurred when originally planned. I am grateful to

the Minister of State for at least postponing the debate so that we could have the background and the accounts and results. I should like to question him on a number of points in the accounts. One is a point that has been raised with the Minister by my hon. Friend the Member for Arundel (Mr. Marshall). Indeed, I had a copy of the letter that my hon. Friend sent to the Minister. I must say that I did not really notice that the Minister answered a great many of my hon. Friend's queries.

Mr. Kaufman: I deliberately refrained from doing so. I thought that it would be discourteous to the hon. Gentleman to reply to his questions before he had put them.

Mr. Lamont: I thought that the questions had been put in the letter. Also, I should have thought that the questions were on matters of fairly significant public interest and importance. For example, one would have thought that the Minister might have said something about the foreign currency borrowings to which my hon. Friend referred in his letter.

Mr. Kaufman: I should not like there to be any misunderstanding about this. I have come to the House today prepared to answer those questions. I intend to answer them. It had been my understanding—perhaps I have been mistaken—that the hon. Member for Arundel (Mr. Marshall) intended to pose his questions during the debate. That being so, it would have seemed a little strange if I had answered them before he had actually risen today to put them. But I shall certainly supply answers to all the questions about which he has written to me. I am very grateful to him for having written to me in advance.

Mr. Lamont: I am grateful for that assurance. We look forward to hearing what the Minister has to say about the Corporation's foreign currency borrowings. He will understand that this is a matter of strong public concern in view of the depreciation of sterling since those borrowings were taken out, and, notwithstanding the recent relative strength of sterling, I think that the repayment obligations of the Corporation have been somewhat understated in the accounts. We should like to know how much the depreciation of sterling has added to the repayment obligations and


whether the losses caused by the depreciation of sterling outweigh the gains to the Corporation of having access to the lower interest rates in other markets at that time.
Lastly, we should like to know what is likely to be the Government's future policy towards other prospective foreign currency borrowings by the Corporation. This is a matter of great importance and concern. In many ways it seems as though the way in which the Government have treated the foreign currency borrowings amounts to almost a direct subsidy to the Corporation, underwriting the exchange losses in order that it can have access to lower interest rates without actually taking the losses. I look forward to hearing what the Minister has to say about that important matter.
I now turn to the general matters raised in the accounts. One is appalled at the level of the prospective loss next year. One wonders for how long a commanding height of the economy can remain a commanding height if it makes losses on this scale. All divisions of the Corporation, except Sheffield, made losses last year. The Scottish and Welsh divisions together made losses exceeding £100 million.
One thing that the accounts do, unfortunately, is to put a final nail in the idea that on the basis of the existing investment programme—and the programme to which the Government are sticking—the Corporation will be able to find half the money for its investment from internal financing. I hope that the Minister will tell us something about what proportion of the investment programme he now thinks can be met internally from the Corporation. The past record is not good. The total capital generated internally by the Corporation in 10 years of existence amounts to little more than £600 million, and in the last two years losses have exceeded depreciation by more than £100 million.
The Minister today answered a point raised by my hon. Friend the Member for Arundel by saying that the Government were not really thinking in terms of setting another target return on capital in quite the same way as in the last four years, and one can see why. In 1972, the target set for earnings was a return of 8 per cent. on capital in the following

four years. It turned out that the Corporation achieved just over 4 per cent. That discipline turned out to be fairly meaningless.
It seems to us that the Corporation is in need of some further disciplines and that some further targets should be set. The Minister referred to the debt equity ratio and the prospective 55–45 relationship. We do not think that this problem can be met by the injection of so-called equity capital—the public sector equivalent of equity capital. We do not think that the injection of this kind of money, on which there is little prospect of earning any dividend, will get to grips with the problem.
We want to be assured that the Government will be able to stand by their IMF-imposed policy—that is, the cash limit. We are told that the cash limit for the Corporation is to be £950 million, of which, I understand—the only basis for saying this is what I have read in the newspapers, and it is not taken from anything said in the House or from any official document£600 million is intended for capital, £250 million is intended to absorb losses and the rest is intended for working capital.
Is it envisaged that within the overall cash limit there will be a division between capital and revenue account? I do not want to take up a firm position on this. I am not wholly opposed to the idea that in certain instances there might be a trade-off with the investment programme if economies have to be made, but at the moment the cash limit appears to be so loose that one wonders whether there should be a division between capital and revenue. We do not want capital money to be used to pay higher wages.
I imagine, too, that the Minister has a profile of the way in which the cash limit will operate quarter by quarter. Is he confident that on the present figures it will be possible for the Corporation to remain within that overall limit? The real difficulty is that the Government carry little credibility on their professed determination to stand by the cash limits. Sir Charles Villiers said that £950 million was the ultimate limit. The Minister of State also said that when the Corporation was up against £lion that would be the ultimate limit. But, as the Minister of State's favourite columnist, Mr. Bernard Levin, has


asked, is the Minister of State sure? Is there not the teeniest, weeniest possibility, the smallest smidgen of a possibility, that if we actually get to £950 million the Government will not cough up?
It is difficult to take the Government seriously. We heard it all before with Briitsh Leyland. We heard threats uttered by the Chancellor at the time of the Budget that, if the trade unions did not co-operate in a pay norm, tax reliefs would not be forthcoming. In the light of the decision that the Government have made on Drax B, it is difficult to believe that in this pre-election period this Government of all Governments will stand by what they said whatever the circumstances, if it means that some of the surplus labour in the British Steel Corporation has to be released, it will be difficult to believe that the Government will stand by the limit.
I wish to turn briefly to the strategy for the future, and particularly the development plan. It was no news when Sir Charles Villiers told the Select Committee that the plan had been changed because the whole market situation of steel had changed worldwide. The question is whether the development plan and its vision of the future has changed enough. We know that it has been overtaken by events, by world capacity and by the failure of demand to grow. Above all—this is the biggest question mark over the British Steel Corporation—there is the growth of the new Third world producers, such as the Koreans and the Brazilians, who by their competition could place our steel industry in the same precarious position as industries such as shipbuilding find themselves.
We have to ask ourselves the difficult question: how far do the assumptions on which the original development plan was based remain? Of course, we appreciate that it was not just a rigid plan that was there for all time. One implements a plan year by year in response to world markets and world developments. The Steel Corporation now says that it has abandoned the idea of 35 million tonnes a year and is now talking of 30 million tonnes in 1982, but are we confident that we shall be able to sell that amount of steel in a world in which everyone is trying to export to everybody else and there is so much surplus capacity? The demands of the development programme

on the Exchequer grow all the time. It was £3,000 million in 1972 and it was revised to £6,000 million in 1976. Now the Minister of State gives us the latest figure of £3,600 million to be spent in the next five years. It is vital that a critical look should be taken at that.
I would like to ask the Minister of State a particular point which has been mentioned in the Press. Mr. Scholey has been quoted as saying that because of the world situation more work will be diverted to the low-cost plants of the Corporation. Will the Minister of State give details of what is involved? How much work is to be diverted in this way? If that is to happen, it puts a question mark against the point of the Government's other strategy of maintaining in existence the old, inefficient plants that should have been closed some time ago.
Another crucial matter about which the Minister of State said very little today concerns industrial relations, productivity and overmanning. I regret that the Minister did not say much about that matter. I hope that when he replies he will say something more.
We remember that last year, when the Secretary of State—we welcome him to the debate—introduced the Bill, he told us how the Corporation would maintain open the old, inefficient plants that he admitted ought to have been closed in order to usher in a new era of understanding and co-operation to make the way easier for increases and improvements in productivity.
The turn-out has not been so good. I do not want to dwell on the events at Llanwern or Port Talbot and the £25 million that the electricians' strike cost the Corporation. We note that Sir Charles Villiers mentioned that strikes were less of a problem, though his satisfaction was somewhat modified by other events that he chose to refer to as "embargoes". Absenteeism at 24 to 25 days per man year is still far too high for the Corporation.
The heart of the problem is overmanning. I should have been interested to remind Labour Members, if there were some present, that they often choose to blame the situation in the steel industry and in the United Kingdom's motor car industry on the lack of investment in the past under private ownership. The pity


is that they never pause to ask themselves why that investment did not take place. It is worth asking. After all the management of any company knows perfectly well that in the long term, if it does not invest, modernise its plant and produce up-to-date products that customers will buy, its long run of competitiveness will be undermined.
Investment by private industry has not taken place in the past because of overmanning. That is true of many sectors of British industry. It is all very well for the Government to say to a public corporation "Despite the fact that overmanning is not competitive and that we are not making profits, we shall still go ahead and invest". It is questionable to make such investment decisions in advance of satisfactory manning levels being achieved and of the corporation returning to profitability. That is the way to distort the economy so that no industrial strategy can ever succeed. In that way we end up milking the profitable, self-sustaining parts of the economy to keep going overmanned, unprofitable white elephants that cannot sell their products.
It is vital that overmanning in the steel industry should be reduced. We know that the same output could be produced with 60,000 fewer men. We are a long way behind manning levels not only in Japan but in many European countries. It would be a tragedy if, the incomes policy restraints having been removed, the opportunity were not taken by the Steel Corporation to reduce overmanning. We know that it is the most difficult thing imaginable to persuade people that it is not only in the national interest but in their own interest that overmanning should be reduced. But it is. Unless there are reductions in overmanning, the British steel industry will not survive on anything like its present scale.
The Opposition do not at this late hour on a Friday afternoon intend to divide the House on this matter. But I should not want the Minister, the House or the country to be in any doubt that we have studied the accounts and listened to what has been said with considerable disquiet and dismay. We are most concerned at the lack of action that is proposed and at the prospects ahead. No one can look with any confidence at the Government's

attempts to impose new financial disciplines on such a poor situation.
We want to place on record our dismay too at the poor performance of the Corporation. Of course, we want to have a competitive industry in this country. We should like the industry to continue to modernise, but if the Corporation is to modernise with public money and to be backed by the taxpayer it must be clearly understood that there is no divine right to incompetence and low productivity. The results that we have just received from BSC illustrate an appalling situation, and it cannot be allowed to continue.

2.31 p.m.

Mr. Stan Crowther: The hon. Member for Kingston upon Thames (Mr. Lamont) said at the beginning of his speech that it would be difficult to overestimate the importance of this order, and I am sure that he is right. It would also be difficult to overestimate the seriousness of the difficulties now facing the industry in Britain. The hon. Gentleman rightly said that there is a continuing slump in demand. I do not think that he mentioned that there is also an excess of steel-making capacity in the whole EEC. In those circumstances there is an incentive for the Community to start fixing national production quotas, and if that exercise took place I doubt that we could expect our industry to come out too favourably. Indeed, the figure of 24 million tons that the hon. Gentleman mentioned could be in excess of any quota that might be fixed.
The current level of imports is desperately serious. People are entitled to ask why steel can be brought half way across the world and compete successfully with steel made in Britain. That question is being asked, and I have not yet heard a satisfactory answer. This country must make up its mind whether it wants a steel industry at all. If the answer is "Yes", we must go all out for more investment, modernisation, productivity and, not least, a much more vigorous selling policy.
Morale in the industry is not high, and who can be surprised? Hon. Members may recall the outstanding achievement of the new bar mill at Rotherham when, within about 10 months, the men hit the production target that they had not been


expected to reach for two years. Everyone was saying how marvellous it was, and the achievement was acclaimed, but within a few weeks the mill was cutting back because of the lack of orders. It is no wonder that the men become bitter. They could see that they were in danger of working themselves out of jobs because the BSC had not managed to obtain sufficient orders to sustain a record level of production. There is disillusionment, and we must stop this trend before that disillusionment becomes absolute despair.
The most difficult problems for the future will be in trying to reconcile the differences of opinion between the Corporation and the trade unions about manning levels. There is no question that that will be the most difficult matter. We must look at this in a social context. In Rotherham we have already lost 7,000 jobs in the steel industry in the process of making the Rotherham works efficient, productive and—I emphasise this—extremely profitable. The BSC has said that there must be even further reductions in the labour force in my constituency. Nobody wants to see the industry employing more people than it needs—that way lies economic disaster—but there is a limit to the social sacrifices that an area must make to bring about future industrial progress, and I believe that Rotherham has now reached that limit.
If communities which depend very largely on the steel industry for their job opportunities are to be asked to accept even further reductions in the employment available, it has to be done as part of a very much more refined and sophisticated regional policy than we have had so far.
I have said many times, and repeat, that we can accept further reductions in the jobs available in the steel industry provided that we have a regional policy that ensures the replacement of those jobs in other industries, so that there is no overall reduction in employment opportunities. As I have said also, the National Enterprise Board could be used in this kind of operation, and it should be so used. I would like to see it given the responsibility of taking over the advance factories which the Department hopefully provides through the English industrial estates. It should do so directly itself or through subsidiary companies—

I do not mind which—and operate in manufacturing so that we do not suffer a total loss of job opportunities as a result of the further reductions in the BSC, which all of us expect if the British steel industry is to become internationally competitive.
There is here a genuine dilemma for people who want to see our industry flourishing, productive and profitable but who, at the same time, cannot accept further reductions in the level of employment opportunities available in our area. I believe that the National Enterprise Board could provide a way out of this dilemma—I said as much in my maiden speech last year. I hope that, sooner or later, someone is going to start taking notice.

3.37 p.m.

Mr. Michael Marshall: I shall follow the remarks of the hon. Member for Rotherham (Mr. Crowther) because he has touched on a point that I had intended to work into my speech. In trying to follow a constructive line, I suggest that there is a good deal in what he says, particularly in the context of the fact that, according to the operating results just published, the Sheffield division of the BSC, which includes his area, is the profit-making division within the Corporation. Therefore, the dilemma that he highlighted emphasises the strong case, even in profitable divisions, for the BSC to bring a much more capital-claim approach to the divisions in sharing out a reduced cake. I hope that the Minister of State will add that to the list of queries.
I share the concern expressed by my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) about the Government's failure to put forward a detailed case. The Minister of State has beguiling ways. He says that he will answer a number of questions that I have written to him about. I appreciate his courtesy. He is always helpful. But—and I hope that I am not being unkind to him—I have a sinking feeling that once more I am facing "Kaufman's law", the situation where he undertakes to answer as many questions as are put to him. I think that his own term is that he has a compulsive provision-of-information streak. He suggests, however, that he will do it at a later stage. That means that eventually we simply run out of time.


What he has done today is prevent me from having two bites at the cherry. I shall listen to the answers that he has promised, and I shall not take up time unnecessarily in categorising the questions that I have raised. He can take them as read. I look forward with interest to his comments.
It does not give anyone with a longstanding connection with it any pleasure to see the problems faced by the British steel industry. The grizzly awfulness of the financial position, as The Guardian called It this week, is evident to all. As my hon. Friend spoke at some length about the corporation, I want to concentrate on two particular aspects of the way ahead—the work of the Department of Industry and the role of Parliament in these matters.
Like my hon. Friend the Member for Mid-Sussex (Mr. Renton), who I know wishes to speak in this debate, I have had the privilege of visiting many parts of the British Steel Corporation in the course of our work on the study by the Select Committee on Nationalised Industries into the future of the Corporation. I pay tribute to the efforts that are going on in all parts of the Corporation among management and unions to tackle those problems.
The hon. Member for Rotherham described his visit to the Thryberghbar mill, which many of us have had the pleasure of visiting. The manning level established there when the mill was opened was 600, and this compared favourably with any plant anywhere in the world, including Japan. So it can be done, and that is the task that faces the Corporation in many other areas.
I shall not take simply a critical line to what is going on. I pay tribute to the way in which Sir Charles Villiers, in his Press statement this week, put forward very plainly many of the grave problems that the Corporation faces. The Corporation's annual report and accounts give a better picture and reflect suggestions that many of us put forward in the debate last year on the Bill from which this order springs.
Those are the aspects upon which the Corporation is to be complimented, but I cannot overlook some of the problems and failings within the Corporation—the

decline in the share of the home market from 70 per cent. in 1970 to a little over half now is a disastrous statistic and one that needs to be looked at urgently.
It is worrying to read in the Press today that Metal Box, which takes£135 million of tinplate every year from the BSC, has said that it has just heard of a price increase without consultation. I hope that the Corporation will be coming up with some answers on that. These arc the sort of problems that we shall want to bear very much in mind.
At the same time, however, we must have some sympathy and understanding for the Corporation, as it faces a very hard winter, in trying to resolve problems of overmanning, the pay explosion, the retention of old plant and, perhaps above all, an increase in raw material prices, notably of coal.
I turn now to the problem of the accountability of the Corporation, through the Department of Industry and the Minister, to this House. It is hard for us to accept the kind of arguments that the Minister advances because he must now accept that he has been coming back to the House on an annual basis, and this means, in effect, that the whole tenor of the assurances and the whole of his arguments about forecasting have been disproved in events time and time again. We have a worrying position in which vastly accelerated borrowings are being matched by little prospect of profit. We are still far from clear about the Government's basic thinking in that direction.
The Minister bears considerable personal responsibility here. He was very much involved in leading the Bill through the House last year, and he rejected then, on numerous occasions, suggestions from both sides about how we should formalise the presentation of information both when this order came before the House and in the future. There has been concern from all quarters about the way in which we are expected to judge these matters. One simple example concerns the report and accounts.
The Minister was kind enough to co-operate with the Opposition in ensuring that this debate took place a few days after the report and accounts were published. Last year, when we argued that it should be possible for the report and accounts to be published within three


months of the end of the financial year, the Minister rejected our approach. Once again, however, we find that we are examining the subject on the basis of a report and accounts that we have barely had time properly to study and to which we should have been able to give more thought.
A pattern is emerging whereby, towards the end of each Session, just before we rise for the Summer Recess, we find ourselves examining the Corporation. It is crucial that we should tie the report and accounts into this timescale which we can see looming up so clearly.
From what we have heard so far, the Minister of State has not given us anything like the kind of basic information that justifies the increased borrowing that we have heard about today.
We recognise—we are realistic—that we have little option today. The option open to us, in effect, is to help the BSC to go bust by preventing the implementation of this order. No one wants to do that. What are the implications of the progressive increase in borrowing, which has gone up at such an alarming rate—from £300 million in 1972, by £1 billion tranches in 1975, 1976 and 1977? If the order is agreed to the first thing that we have to conclude is that the forecasts produced to this House have been shown to be hopelessly wide of the mark, as Peter Hill said in The Times earlier this week.
It is a question not just of the time scale but of the fact that the need for the borrowing is occurring at an ever-increasing rate at a time when profit is declining at an ever-increasing rate. There is also the fact that when a matter such as this is brought before the House we do not have sufficient opportunity to get into the guts of it. Last year, when we tried to make this argument about the need to look more regularly at the subject and to have a White Paper and some formalised procedure, the Minister of State was absolutely categoric, and said that
it is unnecessary and unduly cumbersome to consider the borrowing limit at intervals as frequent as one year."—[Official Report,12th July 1976; Vol. 915, c. 294.]
I know that it is one of the great hazards of this place, when one goes on record, to have one's words quoted later when things have not turned out as forecast.

Here is the Minister of State again, after a year, asking us to increase the limit, and I regret to say that he will be back again in another year from now, provided he holds the same job, although I am not confident about that.
This is the kind of problem that we face. The Minister's remarks reflect the judgment of his Department that things are evening-out and getting better, and that there is no need to trouble the House quite so often. Those of us who have predicted these problems have tried to create a better system. This has been rejected, on the basis that what we are dealing with is some way into the future. Then the Government's forecasts are shown to be inaccurate.
We have asked the Minister of State how long the new limit will last. So far he has not given any detailed reply, other than to quote Sir Charles Villiers' reference to the spring of 1979. If we take that as a hopeful and reasonably accurate estimate, and frankly in view of past events I believe that it is optimistic, it means that by the end of next summer we shall once again have to look at the matter, because clearly, with the time lag required to carry legislation through the House, new legislation towards the end of next year would be too late to prevent the borrowing powers being exceeded yet again.
One of the basic questions that must underlie any consideration of what is involved when increasing borrowing powers must turn very much upon what we take to be the ability of the BSC to contribute in reducing the rate of borrowing. This is an area of special concern at present. There is little doubt that the Corporation's ability to generate finance for its capital investment programme has virtually disappeared. This first happened in 1976. In the April 1976 figures the loss plus the depreciation plus the regional development grants yielded a minus cash flow of £135 million.
This year my worry has been heightened by the Government's inability to measure this kind of cash flow situation even within a matter of weeks. For example, we find that in the March expenditure White Paper generated funds were shown as £250 million plus. Yet, within a month, the Red Book put before us showed an estimated minus cash flow of £50 million.


When we get variations of £300 million, within a matter of weeks, in the Government's own forecast we must have grave worries about the reliance that we can place upon such information.
What the Minister has had to say on both these two major failures of forecasting gives us little assurance. I hope that when he replies he will try to give us an assurance that on the time scale for borrowing and on the decline of the self-generated finance he and his Department have some thoughts and, if necessary, reservations. Frankly, we would rather hear the reservations than simply have bland assurances before measures are passed through this House.
I put to the Minister of State one or two queries that I have raised with him in the letter that I have written in order to give him some notice of points of detail. Foreign borrowing has already been referred to by my hon. Friend the Member for Kingston upon Thames. There is another facet which is very important and which we should consider at present. I have asked the Minister of State whether the estimate last year of £40 million loss by variations in the rate of sterling is now to be amended, as I believe, to nearer the £60 million mark. Perhaps he can comment on that.
Will the Minister of State confirm whether there are other steel companies, apart from the British Steel Corporation, which are borrowing funds from the Commission and DG18 in the form of sterling? I believe they are not doing so, because they prefer to repay in foreign currency rather than run the risk of sterling fluctuations. But surely that is an important development, which the Govern-must have some attitude upon. We shall be interested to hear whether the Minister has had discussions with the Corporation.
It seems that the way in which the Corporation might well consider getting away from some of the problems of the drain on profits is in part to underwrite, with the Corporation standing the balance of foreign exchange repayments.
I come secondly to the rate of return. The Minister of State has made an important announcement in telling us that no immediate target figure is to be set up and that this will follow discussions later this year. He was not able to

give us an assurance that the level of return which the Government would at least start out to put on the table, as it were, would be one which would protect funds. If the Minister cannot in all honesty put this forward he is causing even greater concern to the House than perhaps would otherwise be the case.
Surely this is a crucial matter which the Corporation should take into account when moving into profitability and it can only assist our hopes of putting forward the £1 billion a year at an accelerating rate.
What view does the Minister and his Department take on the relationship between total debt and turnover? The relationship is interesting because it is one that European steel makers are noticeably setting great store on. When I speak of total debt, I am thinking in terms of the total cost of development programmes. In the 1973 White Paper it was £3,000 million, but it may now be £6,000 million.
If the Minister gave an up-to-date estimate I would welcome it. Taking that figure of £3,000 million, it is quite clear that we are moving into an era in which turnover is vastly exceeded by the level of capital investment which is planned for the Corporation over a five-year period. That is a reasonable period to consider, because that is the minimum period before we can expect to get any proper return on that investment.
An interesting contrast is, for example, France. The French have recently been getting extremely worried and have been quoting their total development programme at 120 per cent. of turnover. That is something which clearly M. Jacques Ferry and others have been getting anxious about and it is something that must immediately trigger off certain alarms.
Only today in The Times,Italsider says exactly the same thing about the relationship of turnover and capital investment being 130 per cent. It appears that this will go into a 200 per cent. relationship, which the Department should regard as a critical measurement.
We all understand and appreciate the cash limit approach which has been brought to bear in recent months. We


recognise the determination of Sir Charles Villiers and the constructive thinking that is going on between trade union leaders and the Corporation, resulting in its being freely stated by both that the present level of losses is unacceptable and poses a serious threat to the Corporation's future.
What are the Government doing to match that determination? There are various ways in which they could at least show their good intent. My hon. Friend the Minister for Kingston upon Thames referred to the £65 million a year cost of keeping the Beswick plants open. Why should that amount not appear as a payment from within the Department to try to get the Corporation back on a more commercial footing?
There is also the matter of the cost of the two-year delay in reaching a decision on Port Talbot before the £835 million investment was announced in March this year. It is difficult to assess precisely, but my recollection is that £550 million was the original estimate at 1975 prices and I do not think that the Minister can deny that the additional cost is likely to be at least £100 million. Where a cost results from ministerial delay, consideration should be given to reimbursing the Corporation.
The significance of those figures is that the Government's decisions about Beswick have caused two-thirds of the current BSC deficit, and their delay over Port Talbot and Shotton caused 100 per cent. of that deficit. If we add the two together we see that the Corporation would be showing a profit if it were receiving payments through the Treasury to reimburse the costs of Government decisions. This is a very important matter, to which we can return in a future debate.
We all understand the social implications and cost of the changes about which I have been talking at Port Talbot, Shot-ton and Beswick, but the social costs are beginning to be dwarfed by the sort of figures that I have just given. We need to have an understanding of the balance of cost between redundancy payments, social security payments and investment at present levels, and above all the loss of morale in those parts of the Corpora

tion that are profitable and feel that they are carrying the burden of those parts that are not similarly successful.
All we want is an honest recognition of what is a political equation. Nineteen Ministers in the present Government come from steel constituencies. It is hard to kid anybody in the steel industry, let alone the public at large, that these are not basically political decisions, which should accordingly be paid for by the Government.
I conclude with a brief word about parliamentary scrutiny. What we heard from the Minister this afternoon justifies everything we have said before about the need for a White Paper, about the need for information to be presented formally for us to consider a prospectus before we agree to very large increases in borrowings. Last year, during the passage of the Act. the Minister of State was not even willing to accept our suggestion that he should obtain from the BSC
such information as may be necessary for the House to consider an order under this Act".
We could not have put the matter more generally in offering the hon. Gentleman the opportunity to provide information. He assured us that there would be ample opportunity to consider the matter in this way.
The hon. Member for Motherwell and Wishaw (Dr. Bray) was then equally pressing on the matter of rate of return, which has been pressed from both sides of the House.
I should like to think that some of my suggestions will assist. One which might be added to the list is the need for a cash flow forecast over five years. This practice is adopted by major American steel companies. It is not good enough for the Minister to fall back on the sources of funds—

It being Four o'clock, the debate stood adjourned.

BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, the consideration of Lords Amendments to the Unfair Contract Terms Bill may be proceeded with, though opposed, until any hour.—[Mr. Graham.]

IRON AND STEEL (BORROWING POWERS)

Question again proposed.

Mr. Marshall: The sources of funds for the years 1975–76 and 1976–77 set out as an attachment to the Press release issued by the Corporation are helpful and I realise that they follow representations made in this House and in another place. However. I do not think that they give a reasonable enough time scale. A forecast of a five-year cash flow would be reasonable for us to consider when talking about an increase in borrowing of £1 billion.
It must be virtually unprecedented for a major corporation to have its report and accounts qualified by the auditors with the comment that they give a true and fair picture on the assumption that the corporation will obtain the necessary increase in its present borrowing limits to cover its future requirements. That means that unless we pass the order the Corporation is likely to go bust. We are not inclined to see that happen, but we believe that, in order to overcome this sort of stark brinkmanship, it is essential for us to improve our system.
Therefore, I hope that when the report of the Select Committee on Nationalised Industries comes before the House on its reasonably we shall have an early opportunity to debate these matters, because we need to get into the guts of the reporting systems, which worry us. The Minister has not put forward a prospectus on which any of us would vote or buy a share with any confidence I hope that he will have some better answers up his sleeve when he replies.

4.2 p.m

Mr. Tim Renton: My hon. Friend the Member for Arundel (Mr.Marshall) has given us a well-informed and detailed critique of the British Steel Corporation and of the Government, particularly in relation to the finances and future funding requirements of the corporation. I should like to deal with a different aspect of the Corporation's troubles, namely, the question of manning agreements, productivity and working agreements, following on some of the comments made in the speech of the hon.

Member for Rotherham (Mr. Crowther), with which I had a lot of sympathy.
Before I do so, however, may I declare an interest—not a financial interest or an interest stemming from the fact that in 1970 I fought the Park Division, which is in the heart of the alloy steel-making area of Sheffield, against the Secretary of State for Defence, who, it must be said, won by a small margin, but an interest stemming from the fact that, like my hon. Friend the Member for Arundel, I am a member of the Sub-Committee of the Select Committee on Nationalised Industries which has been considering the question of the Corporation for the past 18 months.
Although nothing that I say will anticipate the recommendations and comments that we shall make in our report to be published in the autumn, it is only natural that some of my personal remarks will be influenced by the large amount of information that we have been given by the Corporation and by the unions representing the work force of the Corporation.
You, Mr. Deputy Speaker, might like to reflect that, if this debate runs what I thought was its allotted time of a further 90 minutes, at the end of it you will have invested another £18 in the Corporation—

Mr. Deputy Speaker (Sir Myer Galpern): Order. I pay no income tax.

Mr. Renton: Whether you pay income tax or not, Mr. Deputy Speaker, you will still have invested £18 in the Corporation, and so will every hon. Member, all the Strangers' Gallery and every man, woman and child in the country. That is the measure of the further £1 billion of borrowing requirement for which the Corporation is asking. Over the next four or five years, decisions will be taken to invest approximately another £100 in the Corporation on behalf of every man, woman and child in this country.
It is only fair, therefore, that the public, through us, their representatives, should have an opportunity of asking whether their money is being spent correctly. They certainly do not have the opportunity of querying it in detail, but they should know whether the money is being used sensibly and to the best possible benefit.
For that reason I fully support the remarks of my hon. Friends the Member for Kingston upon Thames (Mr. Lamont)


and for Arundel about the need for full parliamentary time to scrutinies the enormous funding requirements of the British Steel Corporation that we are called upon to approve this year and will be called upon to approve every year for the next five.
The impression of many who are having thus to invest in the Corporation whether they like it or not must be that the Corporation is now drifting to disaster. I asked the Minister of State about the upturn in sales next year upon which the Corporation has attached so much hope. He naturally said that the BSC could only hope but that it could not be certain. That was an honest answer. So much of the Corporation's chances of getting back into profitability depends upon the upturn in the market. No one knows when that upturn will come or can be certain that it will come within the five years ahead, by which time we shall have had to approve another £5 billion.
Drifting to disaster is a reasonable way in which to describe a situation where a company has lost £95 million last year, is expected to lose £250 million this year and will have to borrow £4 billion to £5 billion in the years immediately ahead.
Do the unions whose members work for the Corporation really appreciate the extent to which it is drifting towards disaster? I doubt it. My hon. Friend the Member for Kingston upon Thames talked about the rate of absenteeism. He said that it was now 24 or 25 days a year.
When our Select Committee visited Japan in November, we were conducted round the new Japanese Ogishima steel works. The hon. Member for Feltham and Heston (Mr. Kerr) asked what was the rate of absenteeism in that works. There was a pause and the works manager asked him "What is your definition of absenteeism?" For once, the hon. Member did not have a ready answer. In the end the works manager filled the gap by saying "In this works, no one goes absent without first either asking leave or informing the management". All three of the major Japanese steelworks made substantial profits in the last financial year.
There are 18 unions involved in the TUC Steel Committee. A total of 24 unions are involved in either the public or private steel-making industry. The 18

unions on the Steel Committee represent more than the number of unions in the whole of German industry.
A manning agreement was reached in January 1976 upon which the BSC management attached great hopes. Alas, the hopes originally attached to that agreement are not being fulfilled. In the last year we have seen the electricians' strike, which brought great additional burdens to the Corporation. Even now we have the failure to commission the new sinter plant at Redcar because of the disagreement over new working practices. The fact that the boilermakers' union does not agree on working conditions has meant that the new sinter plant cannot be commissioned. This has already involved delay of over three months.

Mr. Stan Crowther: I cannot speak for all the trade unions involved in the steel industry. However, from my experience in my area and of the people with whom I am in close contact. I assure the hon. Gentleman that there is a deep sense of responsibility for the future of the industry and a very considerable understanding of the problems. But there is also concern about the total employment level of the area, and there will certainly be resistance to further reductions in manning levels if there is no compensatory factor in the form of some other industry creating a similar number of new jobs

Mr. Renton: I appreciate that frank answer. I do not know of which union the hon. Gentleman is a member, or whether he is a member of a union, but I am pleased to hear of the sense of responsibility of which he spoke.
I come now to the point that the craft unions within the steel industry today—I think that the hon. Member for Rotherham will agree with this—have a capacity to hold to ransom the major investments in major new plants. They have a capacity to hold up the commissioning of new plant at the crucial stage when all the money has been spent, when the investment has been provided and when the Corporation is raring to go. Then the craft unions say "No, we have not yet agreed on working conditions."
Sadly, we have seen this capacity to hold up major new plant and to hold the Corporation to ransom used at Llanwern and Port Talbot, and now at Redcar. It is exactly like the Libyan


Government confiescating the Libyan oilfields when all the money had been spent to bring those oilfields into production.
I believe that the public, who are having to invest in the Corporation, whether or not they like it, £100 each over the next five years, have the right to say that this ability of the craft unions, and the multiplicity of unions within the Corporation, to hold the Corporation to ransom and to delay the commissioning of major new plant in which £600 million, £700 million or £800 million of our money has been invested, is wrong. I therefore urge on the Government, on the Corporation and on the unions that they sit down and agree between themselves that not a penny more will be invested in new capital investment until there is a detailed agreement on manning levels, productivity and the full range of working conditions that will apply at new plants.
We simply cannot afford to have more Llanwern blast furnaces held up for a month, six months or a year while one small but vital craft union delays and keeps negotiations going because it knows that every day that the plant is not commissioned is costing the Corporation perhaps literally £1 million.
I should like to see coming out of this discussion a further rationalisation of the union structure which would lead ultimately to only one union per plant within the Corporation. I say that with much temerity because I know that Labour Members who know the industry well, such as the hon. Member for Rotherham, will say that it is impossible, that there arc too many vested interests involved and that there are too many ancient negotiating rights and too many entrenched positions. I believe, frankly, that there may be too many union officials striving to keep their jobs. However, these are unique times in which the Corporation is living, and they therefore demand unique solutions. The fact that this will be very difficult is no reason why the Government and the Corporation should not try to achieve it.
There is an example—Cockerill, the Belgian steel-maker. It is also by far the largest steel-maker in Belgium and has also lost a lot of money in the past year

—£30 million—which in relation to its size was a very big loss indeed. It was under great pressure in one of the factories to bring in a new oxygen steel-making plant at Lorraine, near Rehon.
The management made it clear at the end of last year that it would bring in that plant only if, in advance of getting the finance, full agreement was reached with the unions on the working conditions, productivity and so on that would apply when the furnaces were blown in. What is more, the management added that there would be a bonus on wages of 2 per cent. at first, rising to 4 per cent. when a certain output at the works through the new furnaces was reached.
When those discussions started, everyone said that it was impossible and that the unions would never agree, but the management made it plain that unless it had that sort of agreement it would not be able to borrow the necessary money and the new works would not be built. Three months later the unions agreed. The money was borrowed, and the works are being built. It is only on those conditions that a private steel-maker can borrow the necessary money.
The hon. Member for Rotherham spoke about de-manning and the pain that the prospect of more redundancies brings in communities that are dependent upon the steel industry. I accept that. In my constituency, which is one of the luckiest in Britain, with a low level of unemployment, I know how painful it is to have redundancies even on a small scale in an engineering company, but I pose to the hon. Gentleman the question whether, in the long run, it is kind, right or humane to keep people in jobs in which they have no long-term future.
Does that really help them more than they would be helped by retraining when they are still young enough and flexible enough to move into other skills and other industries in other parts of the country? They have to be given this retraining prospect, but it is against that background that I query the decision at Shotton, because I do not believe that, on any commercial basis, there can be any long-term future for the hot end at Shotton, the open-hearth steel-making end.
Moreover, the cost of keeping 6,000 men in steel-making at Shotton is likely


to be far less to the Corporation, and thus to the country as a whole, than the additional cost of making Port Talbot a less effective and efficient steel-maker as a result of Shotton being kept going. It is from a national point of view that the decision at Shotton seems to be wrong in overall cost terms. Just as important—perhaps arguably more important—is the question that here are 6,000 people who, in my judgment, are being encouraged to believe that there might be a long-term future for them there, and thus they are not looking around, and are not being helped to look around, for other jobs that there might be in new industries in South Wales.
The steel industry presents a classic case for not nationalising an industry. Political decisions that have been taken over the years have almost all proven to be bad, and that goes as much for the decision taken by Mr. Harold Macmillan's Government to split the new strip mill facilities in Scotland between Ravenscraig and Gartcosh and thus not to have an electric unit at either of those places, because too small a unit was built at both. as the decision taken by the Secretary of State and the Minister of State today to keep Shotton going at the same time as the first phase at Port Talbot is built up. These political decisions have often stemmed from a failure to face long-term reality.

Mr. Deputy Speaker: Order. I think that I ought to draw the hon. Member's attention to the matter under discussion. We are discussing the financing of a nationalised industry. To raise questions about whether it should or should not be nationalised is out of order.

Mr. Renton: I was not aware, Mr. Deputy Speaker, that I had raised that question, but in any case I am moving on from that subject and drawing to the end of my comments.
In saying that the political decisions on the steel industry have almost always tended to be bad, the point I wish to make is to ask where the future hopes of the Corporation come from. They must come from the fact that steel industries throughout the world do not have to be unprofitable.
I turn to a list of major steel companies whose results have been recently reported.

I have already quoted the example of the major Japanese companies which, on their 1976 figures, all made profits. The same is true of the American companies Bethlehem Steel, Inland Steel and United States Steel, and some of the German companies. The steel industry does not have to be regarded in any way as a dying industry. At the moment it is in the depths of depression and none of us knows when it will come out of that depression, but we need to be totally certain that the organisation of our steel industry—its equipment, its manning levels, its work force—will all be right by the time the next upturn comes, whether in 1981 or any other time.
The Metal Bulletin had an article on the steel industry on Tuesday, headlined "When the money has to stop". I believe that the money has to stop now in order that the right decisions should be taken to put the BSC totally in the right shape for the 1980s. I urge on the Government the necessity to rationalise and simplify the union structure, with agreements on manning and productivity levels, before any new capital investment is undertaken.

4.21 p.m.

Mr. Kaufman: The House has every justification for wishing to inquire in detail into the matters which this order involves before it agrees to vote this very large sum of money to the British Steel Corporation. Therefore I in no way regret the scope of the debate, nor do I regret that hon. Members have asked questions. which I shall do my best to answer.
However, I hope that when the hon. Member for Mid-Sussex (Mr. Renton) has had a little time to reflect he will feel that he did the Corporation no service by talking about it "drifting to disaster". It is easy to win headlines that way, and he will probably win himself a headline or two by having said that, but as a responsible Member of Parliament he should appreciate that his statement affects morale in the Corporation but fails to put those problems in their international context.
The kind of remark made by the hon. Member seems to imply that the Corporation is unique in its problems and unique in not being entirely able to come to grips with those problems at present, but if one looks at the way in which the Corporation's competitors are having to


face these problems, outside Japan one finds that they are facing problems at least as grave as, and possibly more grave than, those that the Corporation is facing.
The hon. Member for Mid-Sussex mentioned the problems of Cockerill, in Belgium, whose loss per ton is almost as great as the British Steel Corporation. The Sidmar plant, in Belgium, is losing much more per ton; Sacilor, in France, is losing nearly twice as much per ton; Usinor, in France, is losing nearly three times as much per ton. In Germany, Saltzgitter is losing almost exactly the same per ton, and, in Italy, Italsider is losing considerably more per ton. Even in the United States the massive Bethlehem Company is losing about two-thirds per ton of the BSC loss.
The fact is that the world steel industry is facing almost unprecedented problems. It does not assist the BSC to imply that these problems are ungovernable or uncontrollable. My right hon. Friend the Member for Rotherham (Mr. Crowther) pointed out that where it has modern plant, such as in the Rotherham area, the Corporation can match anyone in the world. At Scunthorpe the achievements are significant and encouraging.
The British Steel Corporation is facing a double problem. It is facing belatedly, for historic reasons, the problem of re-equipping itself against modern foreign competition. Last year when I was visiting the largest steel plant in Japan, I was horrified to find that Kawasaki, the oldest steel plant in Japan, was beginning the massive modernisation that now makes it so profitable at a time when we in Britain were still installing open hearth capacity. That is the contrast.
Again, we face not only an ill-equipped industry with a good deal of obsolescent plant but a major world recession. I hope that these matters will be taken into account when we consider the real, serious and profound problems of the BSC, which I should not seek to under-estimate.
It is inaccurate to say that the Government have made decisions about plant. The decision to keep steel making going at Shotton was a BSC, not a Government, decision. We accepted that deci-

sion. It was not a decision that we imposed upon the Corporation.

Mr. Tim Renton: On the international comparisons made by the Minister, will he at least give me credit for also mentioning the losses at Cockerill? Does he know of any other major steel company in the world where, at this time of disaster for the steel industry throughout the world, major new plant, which would help to achieve lower output costs, is being substantially delayed by a relatively small union? The point that I was making was that, at a time of world difficulty, the new plant that is vital to the British Steel Corporation is not being commissioned because of labour troubles.
Secondly, is the Minister saying that the Government did not make it plain to the Corporation that the decision to keep steel making going at Shotton was a decision that they wished to see reached?

Mr. Kaufman: I assure the hon. Gentleman that that is so. We did not tell the BSC that we wished it to come to that decision. I give him that answer absolutely categorically. Sir Charles Villiers told me that was the solution that he wished to adopt and asked if we would agree. We considered it and agreed to it. We thought that it was a wise and sensible decision. Both Sir Charles and Sir Monty, who preceded him, would have had no truck with a situation in which we sought to make the decision for the Corporation. I can state categorically, clearly and plainly that we never sought to do that.

Mr. Michael Marshall: Surely the Minister concedes that two years is an exceptionally long period for a final decision. Looking at major investment decisions round the world, it is unique. Does he accept that there is clear evidence that referring back all the time by the Corporation of investment proposals is one of the basic problems and part of the argument that we have been advancing this afternoon? Something is clearly wrong when there is a two-year delay, and it has cost money.

Mr. Kaufman: The BSC would now probably be grateful that the delay took place, because, as the market has evolved, the revised decision is obviously the better one. In addition, because of the


problems facing the Corporation, it has decided to defer somewhat the Port Talbot investment.
The hon. Member for Kingston upon Thames (Mr. Lamont), in a speech which I do not in any way criticise for being probing and asking searching questions, was somewhat severe with the Government when questioning whether we would remain firm on cash limits. I have been firm about that this afternoon as Sir Charles was in his statement earlier this week. We should look at the context. We were the first Government to have imposed such cash limits. It was under a Conservative Government that there was a price control; at a time of their counter-inflation policy and their intervention with the Corporation; at a time when they were printing money almost like detergent coupons. That was the situation that precipitated the Corporation into the extremely difficult financial problems with which we have had to cope.
I do not seek to make that as a party political point, because this is not a party debate, but the House must acknowledge that we have imposed these stringent cash limits on the Corporation and that the Corporation has worked and will continue to work within them. There has been great pressure on us, but we have made clear to Sir Charles that we intend to impose these cash limits, and Sir Charles—whose chairmanship is one of the great signs of hope for the Corporation—far from challenging the cash limits, has said that he welcomes their severity.
My right hon. Friend the Member for Rotherham and the hon. Member for Mid-Sussex both referred to manning. I represent a constituency in which there have been redundancies as the result of a mill closure, so I sympathise with my right hon. Friend's misgivings about workers losing their jobs as a result of overmanning being dealt with.
The hon. Member for Mid-Sussex was not misrepresenting the situation when he put forward the point that the best hope for continuing employment prospects for those who remain with BSC is for the Corporation to have internationally competitive manning levels. Indeed, Mr. Bill Sirs and his colleagues in the trade union movement acknowledged this when they signed an agreement with the Corporation on 23rd January 1976. The trade unions know—and Sir Charles has made clear

—that the implementation of that agreement has been handicapped by the pay policy of the last two years. We acknowledge that, and we believe that the pay policy was right. However, there is now a more flexible pay policy and the Corporation will be able to resume the implementation of that agreement. The agreement must be within the pay guidelines that the Chancellor announced last week.
Sir Charles has in no way sought to conceal the consequences of this. In his admirable introduction to the report and accounts—I want to pay tribute to the report and accounts, because they contain no glossy pictures but plenty of information, and that is exactly what an annual report should be—Sir Charles said:
We have to drive the plants hard, re-structure many jobs, introduce more incentives to get flexibility and efficiency, close the old plants and introduce new products. This will involve a reduction year by year in the numbers employed by BSC, under established procedures.
Sir Charles made no bones about that.
The hon. Member for Arundel (Mr. Marshall) was good enough to write to me to put a number of questions. I am sure he will agree that I have dealt with some of them already, and I shall seek to deal with the others now. Some of them were extremely technical, and if the hon. Gentleman is dissatisfied with the scope of my answers I shall be grateful if he will indicate that to me later, so that I can write to him in detail. However, that does not mean that I am not seeking to answer his questions now.
The hon. Gentleman put a point that was also raised by other hon. Members, about the break-even requirement. I have spoken of the discussions that we shall be having with the Corporation but, of course, there is under Section 14(1) of the 1975 Act a break-even requirement which automatically applies if no other target is in force. Of course, we are not departing from that norm. Nor could we, because it is a statutory requirement.
Hon. Members have taken an interest in the revaluation of foreign borrowing. I shall try to explain the position, but it may well be that I shall have to amplify it in explanations in correspondence later. There has been no change this year in the way foreign borrowings are shown in the accounts. Note 22 to the 1976–77 accounts shows figures both for the original amounts of the loans and the adjustments


that must be made in respect of exchange rates ruling on the balance sheet date. The total figures taken into the balance sheet itself includes the foreign exchange provision, which amounts to £61·9 million, compared with £43·1 million on 3rd April 1976. The £18·8 million increase reflects both the fall in the sterling value over the year on loans taken out before the year began, and falls affecting the £114·5 million of new increment loans.
The Corporation has the option, on the basis of commercial advantage to itself, of obtaining exchange cover from the Treasury or of taking the risk itself, so it already effectively has a means of making foreign borrowings in sterling. The exchange rates have not greatly changed since 2nd April, so I would not expect the position now to be materially different from that shown in the accounts.
I myself do not find notional foreign exchange loans to be a helpful guide towards formulating policy on new borrowings. What matters are the exchange rates ruling when the loans come to be repaid.
I was asked about liability to suppliers. Hon. Members will appreciate that measuring the Corporation's outstanding liabilities to suppliers on any particular date is both costly and time-consuming, particularly if subject to external audit, so I am not able to give a figure more up to date than the £773·4 million for creditors shown on the 2nd April balance sheet. Further details are given in Note 16, and information on future capital expenditure is given in Note 11.
The hon. Gentleman asked about the level of indebtedness. In general, it is desirable to keep a balance between the levels of capital expenditure and internally-generated funds, but one has to be prepared to depart from that where circumstances warrant. The Corporation is faced with special problems, arising partly from the need to rectify past under-investment, and partly from the unexpected and severe world steel depression.
The hon. Member for Mid-Sussex got to the fringe, as it were, of order under your predecessor in the Chair, Mr. Deputy Speaker, when he questioned whether this industry was a proper one to be held in public ownership. I contend that one of the basic reasons for taking it into public

ownership was to remedy these past shortcomings. We have to be prepared to maintain investment even though for a while generated funds are lower than we would wish. The hon. Gentleman's own continuing interest in the Port Talbot project suggests that he shares this view, despite his misgivings.
This does not imply any relaxation in the rigorous criteria for investment appraisal, designed to ensure that projects make an adequate return, and the Corporation is having to take account of recent changes in steel demand prospects in its development strategy. Sir Charles gave the details to the Select Committee in public session on 25th May. Investment strategy is also dealt with in Appendix 3 of the Press release, which, after all, was Sir Charles's own response to pressure to adduce reasons for bringing forward this order. That Press release sought to deal with the matter, and every Member was provided with a copy.

Mr. Tim Renton: May I revert to the question of nationalisation? The Minister has clearly looked at the financial results of many other major steel companies. Has he drawn the line whereby he can see that the companies that reported profits in the 1976 period were private and that all the loss-makers were public?

Mr. Kaufman: The hon. Gentleman made a very long statement, and I shall have to investigate it further. What we shall never know is what loss would have been made by what remained of the British steel industry if it had remained in private ownership. It was significant that during the period 1970ȓ74, when we did not have the benefit of the hon. Gentleman's presence in the House, the Conservative Government did not seek to denationalise the steel industry. They realised that it was necessary to retain it, just as the right hon. Lady the Leader of the Opposition has now wisely recognised that it would not be acceptable, should the Tory Party ever come to power, to denationalise the shipbuilding industry. That was a very welcome piece of news that she gave in a shipbuilding area a week or two ago, which I am retaining for my Question Time file to throw at hon. Gentlemen should they ever raise the matter.

Mr. Michael Marshall: When the hon. Gentleman is in opposition.

Mr. Kaufman: I am ready to wait until I am extremely old to have to deal with that point, and when some other party that is slightly farther to the Left takes over from me.

Mr. Michael Marshall: Does the Minister accept that there is a meaningful relationship between turnover and total debt, as in a five-year investment programme? Does he accept the international comparisons? Does he accept that there has to be some finite limit on the level of indebtedness?

Mr. Kaufman: I am not sure that I accept that it is a meaningful relationship. It is, after all, not a relationship that is arrived at by some calculation; it is something that eventuates on the basis of maintaining a capital investment programme. At the same time, as the hon. Gentleman knows, because of the cash limits the Corporation is reappraising the phasing of its investment programme. That being so, even if I accepted that there was a meaningful relationship, which I confess that I do not, there is not a constant relationship. It is a changing relationship.
The hon. Gentleman also asked about tying loans to specific investment. This is ground that we have gone over before. Recent developments do not lead me to feel that there is need to change our present practice. The Government exercise overall control through issuing finance, approval of the investment programme, through consideration of major projects—such as the plate mill which I have spoken about this afternoon—and in setting the cash limit. Over the period for which the £1,000 million of increased borrowing powers is expected to last the Corporation's use of funds for purposes other than meeting financing charges are forecast to be significantly greater than £1,000 million. Therefore, the Corporation is not expected to use increased power to sustain existing debt.
I have done my best to deal with the points that the hon. Gentleman has put.

If he is at all dissatisfied with my answers, as distinct from disagreeing with them, which is a different matter, and if he feels that my replies have not been informative enough, if he writes to me I shall do my best to provide him with more information.
I have sought as best I can to deal with the points raised. It is entirely right that the Opposition should have sought as much information as they could on this important order, which deals with very large sums of money. I have not sought in any way to pretend that the problems of the Corporation are not very great, but I believe that they can be overcome. The order will assist in overcoming them. I hope, therefore, that the House will approve it.

Question put and agreed to.

Resolved,
That the draft Iron and Steel (Borrowing Powers) Order 1977, which was laid before this House on 7th July, be approved.

ELECTRICITY

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &amp;c.),
That the draft North of Scotland Hydro-Electric Board (Compensation for Smelter Deficits) (No. 2) Order 1977, which was laid before this House on 28th June, be approved.—[Mr. Graham.]

Question agreed to.

TOWN AND COUNTRY PLANNING

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &amp;c.),
That an humble Address be presented to Her Majesty, praying that the Location of Offices Bureau (Amendment) Order 1977 be made in the terms of the draft laid before this House on 23rd June.—[Mr. Graham.]

Question agreed to.

To be presented by Privy Councillors or Members of Her Majesty's Household.

UNFAIR CONTRACT TERMS BILL

Order read resuming adjourned debate on Question proposed [15 July] on consideration of Lords amendments.

Clause 1

SCOPE OF PART I

Lords amendment: No. 3, in page 2, line 14, at end insert "of the occupier".

Question again proposed, That this House doth agree with the Lords in the said amendment.—[Mr. Ward.]

4.45 p.m.

Mr. Anthony Grant: On a point or order, Mr. Deputy Speaker. This Bill, first formally came to the notice of hon. Members when the Order Paper was published this morning. Apart from a somewhat vague passing remark in answer to a supplementary question by the Leader of the House yesterday, most hon. Members had no conceivable clue that the Government were doing something which is not unprecedented but is certainly unusual, namely, giving time for a Private Member's Bill at this late stage. The Government are entitled to do this but is it in order that they should do so merely by putting this business on the Order Paper on the very day proposed for consideration of the Bill with out giving earlier notice?

The Minister of State, Department of Prices and Consumer Protection (John Fraser): Further to that point of order, Mr. Deputy Speaker. The Leader of the House made it clear yesterday that this Bill would be part of the business for today.

Mr. Grant: The right hon. Gentleman said that he hoped it would.

Mr. Fraser: My right hon. Friend did not use the word "hope". He said:
I hope"—
the hon. Member is correct—
that the first matter will be dealt with by the House tomorrow."—[Official Report, 21st July, 1977; Vol. 935, c. 1853.]
That was in reply to the first part of a supplementary question put by my hon. and learned Friend the Member for Leicester, West (Mr. Janner).
The second point I wish to make Is that the Order for the continued discussion of the Bill has been on the Order Paper all week. Thirdly, notice had been given through the usual channels that this debate would take place.

Mr. Michael Neubert: Further to that of order, Mr. Deputy Speaker. I hope you will accept my apologies for being momentarily out of the Chamber when this matter was first raised. It is something which I wished to raise myself. I would like to declare that nothing I say should be construed as an attempt to delay the passage of the Bill. The Opposition support the principle of the Bill and welcome the generality of its provisions.
The Leader of the House said as recently as yesterday week:
the Government have no proposals for providing extra time for Private Members' Bills.
The right hon. Gentleman went on to say, dealing with the question of Lords amendments to Bills:
there is a difference. Lords amendments should be taken into account in the particular circumstances, but there is a difference, of course."—[Official Report, 14th July 1977:Vol 935,c.788–96.]
That remark seemed to be ambiguous. We have already seen how my hon. Friend the Member for Harrow, Central (Mr. Grant) has been considerably inconvenienced because of the practice of giving only 24 hours' notice. Notice in this case was given in an indirect way by means of a planted Question by a Labour Back Bencher.
My point arises on another Private Member's measure which has been on the Order Paper all week, namely, the Insurance Brokers (Registration) Bill. I seek your guidance, Mr.Deputy Speaker, on a point arising from the circumstances of the resumed debate on this Bill May I know whether, if the Government introduce that other Private members' Bill, with the same notice or without any notice at all, it would be in order to move a dilatory motion against such a proposal? It is intolerable for hon. Members to be subjected to this treatment because of insufficient notice being given or notice being given in a way that is often likely to escape the attention of hon. Members unless they are particularly alert.

Mr. Anthony Grant: Further to that point of order, Mr. Deputy Speaker. May I make it clear that, according to my information, contrary to what the Minister has said, the usual channels were informed last night that this Bill would not be taken today? It was only this morning that a change of mind took place. My remarks, I think, still apply.

Mr. Deputy Speaker (Mr. Oscar Murton): This question is not a matter for the Chair. The hon. Member for Rom-ford (Mr. Neubert) raised a hypothetical question, which again is not a matter that concerns the Chair. No doubt what the hon. Gentleman has said will be borne in mind by those who are responsible.

Mr. Michael Ward: On a point of order, Mr. Deputy Speaker. Will it be for the convenience of the House, knowing that there are a number of hon. Members who have specific points to make on these rather technical amendments from the other place, to take Lords Amendments Nos. 3 to 7, to which I shall ask the House to agree? I shall then formally move Lords Amendments Nos. 8 and 9 to allow hon. Members to make their observations on these technical points. I shall carry on in the same way with later amendments.

Mr. Deputy Speaker: Is the hon. Gentleman's proposal agreeable to the House?

Mr. Roger Moate: Further to that point of order, Mr. Deputy Speaker. It is very difficult for anyone to follow such a proposition. It would be much easier to keep to Mr. Speaker's original selection of amendments. Personally, I would prefer us to do so.

Mr. Deputy Speaker: In that case, it is necessary that we should remain with the selection as it exists.

Mr. Ward: In the case of the amendment before the House, the debate on which was adjourned on Friday of last week, we had been dealing with the question of protecting the interests of the private land or property owner who might allow his property to be used for a business purpose. The amendment is per-

fectly clear. It means that in certain circumstances liability rests with the person who enters the business arrangement but that the position of the private person will be protected. I therefore hope that the House will agree with the Lords amendment.

Question put and agreed to.

Clause 2

NEGLIGENCE LIABILITY

Lords amendment: No. 4, in page 2, line 28, leave out from "notice" to "a" in line 30 and insert
purports to exclude or restrict liability for negligence".

Mr. Ward: I beg to move, That this House doth agree with the Lords in the said amendment.
Hon. Members will see that this amendment relates to what is known as the rule of volenti non fit injuria, in which case the defendant in an action for negligence will sometimes succeed by showing that the plaintiff had full knowledge of the danger involved in voluntarily accepting the legal risk of his failure to take reasonable care.
The Law Commissioners recommended that where a provision excluding or restricting liability was ineffective the fact that the person agreed to, or was aware of, the term of notice should not by itself be regarded as sufficient evidence that he was voluntarily assuming the risk. Subsection (3) now makes this perfectly clear to the courts and they will have to have regard to other relevant facts in the case.

Question put and agreed to.

Clause 4

UNREASONABLE INDEMNITY CLAUSES

Lords amendment:No. 5, in page 3, line 10, leave out "his own".

Mr. Deputy Speaker: With this we may take Lords Amendments Nos. 6 and 30.

Mr. Ward: I beg to move, That this House doth agree with the Lords in the said amendment.
The amendments relate to unreasonable indemnity clauses. It has been suggested that the words "his own" in the clause, a term requiring an indemnity in respect of a business man's vicarious or general liability, might not be included. Since negligence is a breach of duty, the point is probably covered by Clause 1(4). As the words serve no purpose other than that of emphasis, I believe that we should accept the view of the other place that they might as well be omitted.

Question put and agreed to.

Lords Amendment No. 6 agreed to.

Clause 5

"GUARANTEE" OF CONSUMER GOODS

Lords amendment: No. 7, in page 3, line 23, after first "by" insert "reference to".

Mr. Ward: I beg to move, That this House doth agree with the Lords in the said amendment.
This is a purely drafting amendment to bring the clause into line with the rest of Part I. Clauses 2, 3, 4, 6 and 7 refer to attempts to exclude or restrict liability by referring to a contract term, and for consistency this clause should do the same.

Question put and agreed to.

Clause 7

MISCELLANEOUS CONTRACTS UNDER WHICH GOODS PASS

Lords amendment: No. 8, in page 4, line 23, leave out "and (3)" and insert "to (3A)".

Mr. Ward: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this we may take Lords Amendments Nos. 9 and 56.

Mr. Ward: Although I understand that some hon. Members may have points to make on the amendment, it was made by the other place as a clarification of the original Clause 7, which it was felt was not sufficiently clearly drafted. I accept the wisdom of the noble and learned Lords, and recommend acceptance of the improvement that they have made.

Mr. Anthony Grant: I rise because I do not believe that the amendment does what is necessary to rectify a serious defect in this part of the Bill. I shall cite as an example the effect that the Bill will have upon the alarm system industry, and declare an interest as chairman and director of a company that manufactures and installs intruder alarm systems.
I do not dissent from the principles of the Bill, which is designed to assist the consumed—although it does so largely at the expense of the manufacturer and the trader—but a number of things have happened, and such legislation is particularly difficult for small and medium-sized businesses. Therefore, it is imperative that we give the greatest possible scrutiny to the effect of the Bill on the business community, and particularly small businesses.
After all, small businesses have had a whole range of burdens placed upon them since the passing of the 1973 Act. There were the Employment Protection Act and the Price Commission Act, to name but two burdens. Therefore, we should not stampede through this Bill without looking closely at its effect on industry and if necessary giving the hon.

Gentleman the opportunity to take it away and think this matter through.
The new subsection is designed purely to tidy up the wording of the clause, but in the other place an extremely important question was raised by Lord Lyell, supported by Lord Hailsham, on the effect of the clause would have on the intruder alarm system industry, and no doubt on other industries.
5.0 p.m.
It is relevant to point out that the Lord Chancellor—I believe that I am entitled to quote his words, although I cannot quote what the other noble Lords said—said on 20th June:
The noble Lord, Lord Lyell, said he had not given notice of the point he raised and therefore perhaps the best thing would be for me to read carefully what he said and return to the matter.
He then gave a quick, off-the-cuff answer in which he said:
The advice I have briefly received is that if a contract for hire of the alarm is made and there is a defect in the alarm which would bring the `fitness for purpose' question into issue, Clause 7 will strike down as between customer and firm exclusions relating to fitness for purpose…".
He went on to promise to look at what was said in the debate and if there was need to return to the subject he would do so at a later stage. At the end of the debate, Lord Lyell said:
The noble and learned Lord the Lord Chancellor has given a clear undertaking to look into the matter. Following the plethora of legal advice I have had from my noble and learned friend I look forward with growing expectation to receiving equally excellent advice from noble and learned Lords opposite in due course."—[Official Report, House of Lords,20th June 1977; Vol. 384, c. 461 and 464.]
I have looked through the reports of the subsequent debates in the Lords and I can find nothing but total silence from the Lord Chancellor. The point raised in the debate was not dealt with. Therefore, it is necessary for me to explain the background to the problems affecting the industry.
At the time of the passing of the 1973 Act, affecting goods, anxiety was expressed by the companies in the alarm business on account of the unpredictable nature of the liability that it might


impose on alarm installing companies in the case of an alarm being provided for a private house. In contracts covering the installation of fire and intruder alarms it has long been the practice of the installing company to prescribe a limit upon its liability in the event of the alarm failing to function due to some defect in the equipment provided.
There is justification for this practice because, first, any liability assumed by the alarm installing company would require the prudent alarm installer to obtain indemnity through a third party insurance policy, and the cost of this would be a normal operating cost of the installer, which would be an element in the installing company's price to the customer. This would ultimately be payable by the customer anyway. Secondly, the installing company, by the very nature of things, can have no knowledge from day to day of the value of the property that the alarm is likely to be protecting from time to time. Third party insurance of this kind is more expensive than direct loss insurance, and very much more so, if obtainable at all, if one cannot predict accurately the level of cover required.
Thirdly, taking the broad view, it can be argued that it is not necessarily against the interest of the customer for the price to be kept down to a reasonable level by setting an upper limit on the alarm company's liability in the event of defect leaving the customer who knows accurately the value of any loss he is likely to suffer to obtain what additional cover he requires by direct loss insurance.
That was the justification for the policy adopted. One can therefore understand many of the arguments put forward by the hon. Member for Peterborough (Mr. Ward) in favour of barring exclusion clauses from consumer sales which relate to the general run of goods likely to be purchased for domestic purposes. But when one contemplates the private householder who seeks the services of an alarm company to install an intruder or fire alarm in his private house, it is likely to be occasioned by an abnormal risk of loss. A wealthy householder who has filled his house with valuable pictures or china may seek to protect himself from a loss of many hundreds of thousands of pounds. Likewise, in the case of a fire alarm, the total loss of a house of quality

may well involve a sum of £100,000 or more.
An intruder alarm may be installed in a private house for about the same, or, indeed, rather less than the cost of a colour television set. If a colour television set breaks down it is not unreasonable to expect the manufacturer to compensate the householder for the loss involved, but in the case of an alarm company the loss is likely to be out of all proportion to the cost of the product.
The industry has coped with the situation since 1973 by renting rather than selling equipment. It was not a direct consequence of the Act, but it stemmed from the requirements of the National Supervisory Council for Intruder Alarms which requires all installers to ensure compliance with the relevant British standards. It was thought that the only way in which alarm installers could ensure that certain standards were maintained was by their retaining ownership. Therefore, the vast majority of alarm installers operate on a rental rather than sale basis.
The 1973 Act did not prevent the incorporation of limitation clauses in rental contracts. I refer to paragraph 26 of the Law Commission's Second Report, which states clearly that the Commissioners were thinking in terms of the sale and hiring of items such as television sets and not of the broader issue of subrogation and the question of liability by the alarm company.
I am arguing that subsection (1), which the amendment seeks to alter, places a quasi-insurance obligation on alarm companies in the event of an unlimited limitation on his liability. That cannot have been in the minds of the Law Commission at the time. Lord Hailsham stressed the case vividly when on 20th June he cited the example of someone seeking to protect his house from burglary when he had in it a valuable Rembrandt worth £750,000. The company that has installed the alarm cannot possibly know, or be expected to know, what is in the house or how valuable are its contents. The owner of the house could install another Rembrandt, two or three Rubens and a Velasquez. It is not reasonable that the company should be expected to anticipate that.
An insurance company would anticipate the situation by charging the necessary premium. It is unreasonable to expect alarm companies either to anticipate or to take out insurance to cover such an event.
As Lord Hailsham said, once an alarm system is installed the prudent householder should take out insurance. If a claim is made for £750,000 from the insurance company and it is met, everybody is happy at that stage. But under the Bill the insurance company would be entitled to say that it has a right of subrogation to the alarm company and should be able to sue that company, which might be small, for the full value of the Rembrandt. As Lord Hailsham said, those who propose the Bill did not intend that it should protect insurance companies in that way, but by this clause it is unwittingly giving protection to insurance companies.
Here I draw attention to a rather curious feature of the Bill. As far as I can gather. insurance companies are totally outside it. I find that very strange. All other suppliers of services—architects, alarm companies, and so on—fall within the terms of the Bill, but not insurance companies. I understand that the reason for that is that the British Insurance Association said to the Department "If we give you a letter promising to do this, that and the other and to maintain certain standards, will you please excuse us from the Bill?" I understand that the Minister accepted that. If that is so, I find it strange that one section of the business world should be excluded, merely on an exchange of letters or something like that between one organisation dealing with insurance companies and the Minister. It is most unsatisfactory.
In any event, there is no reason whatever why insurance companies should he put in a more favourable position and be able to subrogate and take over and impose a most intolerable liability upon the alarm system companies.
I know the answer that the Minister or the lion. Member for Peterborough may give. The hon. Member said that in this clause we are talking about the test of reasonableness. However, as my noble Friend, Lord Hailsham, brought out, no one knows what the test of reasonableness is. We shall be coming to that later.

What is certainly not made clear is what are reasonable damages. Is there any test of what the courts might impose upon an alarm company that was sued by an insurance company for an enormous loss of which it knew nothing and could not possibly anticipate? Will the court be able to say, under the test of reasonableness, that it would be reasonable to make the alarm company pay the full amount to the insurance company? Perhaps the Lord Advocate will be able to make a judgment on this matter.
This point was raised very clearly in the House of Lords, but it has never received an answer from the Lord Chancellor. There has been no indication, in any of the reports of debates that I can find, of the way in which this major problem can be dealt with.
Therefore, I find the amendment, which is a kind of drafting amendment, wholly unsatisfactory to deal with something that could have profound effects on an industry that is of great importance in these days of increasing crime. At best, it could substantially add to the costs imposed upon the customer, and at worst, it could lower the whole standard of security in this country. I hope, therefore, that I shall get a reply from the hon. Member or the Minister, although I appreciate that these are rather difficult legal concepts. None the less, they are very valid.

Mr. John Fraser: The hon. Member for Harrow, Central (Mr. Grant) began by suggesting that the Bill was a burden on business men and an advantage to consumers. I hope that on reflection he will agree that it is as great an advantage to small business men as it is to consumers, because the small business man is just as much subject to exemption clauses and to pressures, and the inability to negotiate at arm's length on equal terms with a large company, as is the consumer. Indeed, a good many complaints that come to my Department are from small business men concerning, say, their dealings with petrol companies, unfair discounting, and discounting in the grocery trade. I need not give a catalogue of examples.
However, I take the point that one has as much a duty to defend the small business man against abuse of power as one has to defend the consumer against it.


That is what the Bill does, as did the legislation that the hon. Member introduced as a Minister at the Department of Trade and Industry in 1973. It gives the business man contracting on standard terms the chance to contest the reasonability. I hope that the hon. Gentleman, on reflection, will not regard that as being a criticism of the Bill.
The second point that the hon. Gentleman made was about intruder alarm systems. I think that he accepts that as a result of the legislation that he introduced, if an intruder alarm were sold outright to a consumer it would not be possible to contract out of liability for fitness for purpose of that alarm. What the Bill does is to say that whether the intruder alarm company sells the object outright or hires it out the legal relationship between the parties should be the same. What the hon. Gentleman seeks to do is to provide an additional benefit to the supplying company if a hiring takes place. That is part of his argument.
5.15 p.m.
I think that as a matter of principle one should not draw that distinction. There are many other areas in which the 1973 Act is being extended. For instance, if somebody buys a motor car outright and as a result of the negligent construction of the car, or its failure to be fit for a purpose, he suffers death or serious injury, damages can be recovered against the person who sold the goods, apart from any rights that there might be against the manufacturer.
If the same consumer, in dealing with the same garage, chooses to hire the car for a fortnight—the same car in the same condition—and is killed or injured, it would seem wrong in principle and in logic that one should draw a distinction and say that in one case damages can be recovered for death or personal injuries but not in the other. I cannot see any logic in that situation, and I hope that the hon. Gentleman will not press the matter against that logic.
Another point made by the hon. Gentleman is that intruder alarm companies hire out equipment. It is not that these companies want a captive audience, although sometimes that is alleged, as the hon. Gentleman knows. The hon. Gentleman said that alarms are hired because

what happens is that although the possession of the instrument is transferred, the customer is assured of a continuous maintenance service.
The problem that arises is whether the maintenance was carried out correctly. If an intruder alarm system is hired without any contract for maintenance, one cannot expect the hiring company to be continuously liable for maintaining that instrument in the condition in which it was when it was first installed, just as one does not expect the seller of a car to give a guarantee that the car will always be of first-class quality and fitness. The sense of the situation is that the car will deteriorate unless one maintains it.
The point at issue is whether there has been a breach of the duty in the intruder alarm company to maintain the instrument carefully. The question is whether there has been negligence. I cannot see that it is right to say that if the maintenance contract has been negligently carried out by the supplying company that company should be able to exempt itself from all liability. That is what the argument comes down to.
I hope that I can say one or two things that may prove to be reassuring. I cannot give a final opinion. This is a matter for a court. All questions of damages are for the courts, but there are two things that I can say. First, it is surely not right to say that the supplier of the intruder alarm should be liable without limit for all losses suffered as a result of the failure of the alarm system. That cannot always be so, because it may be that the damage is not proximate to the failure that occurred.
The argument that often arises is whether other precautions ought to have been taken or that the consumer was replying too much on one installation to protect, for example, a valuable Rembrandt. One might come to the conclusion that if one had a Rembrandt that was that valuable it would not be enough to rely solely on an intruder alarm system, but that the painting should have been kept in a safe.
There is difficulty here. It does not follow that the damage suffered by the consumer would necessarily be laid at the door of the intruder alarm company. Some back-up insurance could be obtained by the hirer or the provider of the maintenance service. Other people


providing maintenance already have to be liable without limit. For instance, solicitors—here I declare an interest—are always liable without limit and cannot contract out of liability for negligence in any situation, and they seek insurance for that purpose.
I understand that companies in the position of the hon. Gentleman's company might find it difficult to get adequate insurance cover if the Bill came into effect rapidly. We need to defer the time when the Bill comes into effect until next year to give a long lead-in period, so that arrangements can be entered into to provide extra insurance where it does not exist in the sort of situations that the hon. Gentleman predicates.
In the example given by the hon. Gentleman, if the recipient of the hire and maintenance service was a business man, it would be in order to introduce an exemption clause to provide exemption of liability. I know that that does not go the whole way to meet the hon. Gentleman's point but it goes some way, and I hope that he will accept that there is some logic in aligning the law on supply of goods with the law on the sale of goods.

Mr. Moate: Will the Minister explain what he means when he says that if the other party were a business an exemption clause would be acceptable or in order? The definition of "consumer" in the Bill does not make that point. The definition implies that it includes a business man in that context. Is the Minister right in saying that a business man would not be a consumer in the sense that the Bill means?

Mr. Fraser: When I find chapter and verse on the definition of "consumer" I shall return to the hon. Member for Faversham (Mr. Moate).
I turn now to the point raised by the hon. Member for Harrow, Central about subrogation. The hon. Gentleman said that Lord Lyell raised this matter in Committee in the other place and that nothing further seemed to have happened, and that the Lord Chancellor did not seem to have done anything about it. I hope that he will acquit the Lord Chancellor of any discourtesy to Lord Lyell. The Lord Chancellor wrote to Lord Lyell about this matter on 27th June and Lord Lyell did not raise the matter on Report. Of course there is no objection to the hon. Gentleman's raising it now.
The letter from the Lord Chancellor is fairly short, so perhaps it would be as well if I read part of it and summarised the rest. The Lord Chancellor said that he had looked at the matter raised at Committee stage, which deals with the example of a householder who hires a burglar alarm and suffers loss as a result of a fault. The letter then stated:
You asked whether the insurers of the householder would be entitled, on indemnifying him and exercising their right of subrogation to him, to the same rights against the alarm company as he had.
The letter then deals with the doctrine of subrogation. The effect would be that the insurance company would be subrogated to the rights of the householder. The insurance company is subrogated to the rights of the householder, where the alarm was sold outright, if there was a provable breach of obligation under the Sale of Goods Act. The same point would arise in relation to the supply of goods by way of hire. The letter comes to that conclusion.
The Lord Chancellor stated:
You will appreciate that your point on the law of subrogation is one of general application".
I am sure that the hon. Gentleman will agree that that is not the only place where it arises. Wherever one alters liabilities in relation to tort or contract—instance, if one passes a statute debarring a defendant from a certain defence in the law of tort—or alters the law on exemption clauses or imposes an implicit obligation, as under Section 32 of the Housing Act 1969, from which one cannot contract out, one imposes a subrogation that cannot be contracted out of. Whenever we change the law of contract by a side wind we affect the rights of subrogation. That must be so.
The Lord Chancellor wrote:
You will appreciate that your point on the law of subrogation is one of general application, since the doctrine is an integral feature of the law of insurance. I do not think that it would be appropriate to deal expressly with subrogation in this Bill, and, indeed, the insurance industry might well raise objections of principle if we were to attempt to do so".
I do not think that the veto of the insurance industry is relevant. It would be difficult in this Bill, which deals with exemption clauses, to deal with subrogation. I hope that I have given a fair


account of the reply given in correspondence to Lord Lyell.

Mr. Anthony Grant: I appreciate that, and I hope that I can study the letter in more detail. The conclusion that I reach is what I and the industry fear is only too true. The Minister said that we could not deal with the law of subrogation in the Bill. Can he indicate when it might be dealt with in future? I am sure that he understands that this is an appalling dilemma for some people. I do not think that many other people are in this position. It is fundamentally the alarm system industry that must face it. Why are the insurance companies excluded from the Bill?

Mr. Fraser: Subrogation is largely an insurance matter. I do not know whether anybody contested the subrogation point when the hon. Gentleman introduced his Bill. It is not moving a long way.
I undertake to ask the Lord Chancellor and, indeed, the Department of Trade, which deals with insurance matters—not my Department—to look further at the point made by the hon. Gentleman.
Why are insurance companies excluded? It was not the recommendation of the Law Commissions that they should be included. That is the first reason.
The second reason is that insurance companies, like others who are exempted from the provisions of the Bill, deal largely with international trade. Just as we imported the Athens Convention, so we have left out contracts for the international sale of goods. Insurance tends largely to be a matter of international trade, and it has been exempted for that reason. Inclusion could do a lot of damage to the competitive aspects of our insurance industry.
I do not know why the hon. Member for Faversham should pull a face. He is in the industry. Therefore, he must know that if we put British insurance companies at a disadvantage compared with their foreign competitors, we shall do no good to the British industry or the economy.

Mr. Moate: I was thinking that the Minister was putting forward an extraordinarily thin argument. He might have an argument, but to suggest that we do

not include protection for the British consumer simply because insurance companies engage in a wide range of international contracts is very feeble. We are concerned with millions of insurance policies issued by British insurance companies to British people. If he had wanted to include them he could have done so.

Mr. Fraser: That is the second reason. I said that I would give a number of reasons.
The third reason is that exemption clauses in insurance contracts tend on the whole to be not exemption clauses as we understand them but clauses that define the risks. When one examines an insurance policy one often finds that what reads as the exemption clause is a way of defining the risk. For example, the house is insured, except for damage by nuclear explosion. That is not an exemption; it is a definition of the risk.
To give reassurance to consumers over what might be thought to be undue reliance on clauses that are not exemption clauses, a statement of insurance practice was issued by the British Insurance Association and by Lloyds, which I hope the House will welcome.

Question put and agreed to.

Lords Amendment No. 9 agreed to.

New Clause A

ARBITRATION OF DIFFERENCE (CONSUMER DEALINGS)

Lords amendment: No. 10, after Clause 9, in page 5, line 28, at end insert—
A.—(1) As against a person dealing as consumer, an agreement to refer future differences to arbitration cannot be enforced except—

(a)with his written consent signified after differences have arisen; or
(b)where he has himself had recourse to arbitration in pursuance of the agreement.
(2) Subsection (1) does not affect—

(a)the enforcement of arbitration agreements to which section 1 of the Arbitration Act 1975 applies (that is, arbitration agreements other than "domestic" within the meaning of that section);
(b)the resolution of differences arising under any contract so far as it is, by virtue of section 1(2) and Schedule I, excluded from the operation of section 2, 3, 4 or 7."

5.30 p.m.

Mr. Ward: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this we may take Lords Amendments Nos. 15, 20, 33, 48, and 57.

Mr. Ward: This group of amendments relates to the matter of arbitration. The Lords carefully considered the proposition that any future agreement under Clause 12, which requires the consumer to submit the differences to arbitration, would be unenforceable unless the consumer consented to arbitration. That is what this amendment proposes. The whole group of amendments would enable the consumer, in the case of a dispute to go to court if he so wishes, or to use the arbitration service. We are advised that the Director General of Fair Trading believes that in many cases arbitration is preferable to going to law, but within the code of conduct negotiated by his office the consumer always has the choice. Once the choice has been made to use arbitration, ordinary arbitration law applies.
I hope that the House will agree that consumers should have the right to go to court and that that right should not be taken away by a discreet clause in a contract. If arbitration is cheaper and easier than going to court, the consumer, if he has faith in the impartiality of the arbitration, should be allowed to do that.

Mr. Neubert: This amendment covers an extremely important point which should be seen in the context of the whole Bill. The Bill started life as an innocent and innocuous measure but it has gathered increasing momentum. Its original 15 clauses have been extended to 34 clauses plus four schedules. What was a Private Member's Bill has become Government legislation, with the full weight of the advice and assistance of a Government Department. The title and the terms of reference of the Bill, which referred to the avoidance of liability, have been extended to cover unfair contract terms. The Bill's provisions, which originally related to England and Wales, have been extended to cover Scotland and Northern Ireland so as to embrace the whole United Kingdom.
In consequence, what was a relatively minor improvement in the law of contract in favour of the consumer has turned into a revolution in the law of contract to the point at which it threatens the very concept of contract itself. All that is germane to the amendment. Indeed, at this late stage the Bill is beginning to take on the appearance of a runaway train thundering through the gap left in the Government's legislative programme by the collapse of the Scotland and Wales Bill. My intention is to apply a touch of the brake by offering a word of caution, because there is a real danger inherent in the amendment.
There is a danger to which the sponsor of the Bill has not alluded and over which he has skated extremely rapidly. The amendment goes well beyond the general unerstanding of those of us involved in consumer protection legislation that the concept of caveat emptor is an inadequate safeguard in today's complex society. The amendment goes much further. We should appreciate that there has already been a fundamental change in the law of contract under the Bill, as a result of the arguments put forward by my hon. Friends and me in Committee and which were carried against the vote of the two Ministers in attendance. Our amendments switched the burden of proof of reasonableness from the consumer to the supplier of the service. I am sure that the sponsor of the Bill will acknowledge that that was a fundamental change in the law of contract.
However, there is some argument against making such a radical change as is contained in the amendment at such a late stage. The amendment seems to be the exemplification of the situation in which, having been given an inch, there is inclination to seek a mile. What is more, no less an authority than the Lord Chancellor has given his backing to this revolution. What is its nature? It is proposed that there should not be any requirement to go to arbitration unless the consumer agree to it. The important point emerging there is that the consumer gives that agreement subsequent to the performance of the service. That seems extraordinary.
The Lord Chancellor said:
I should have thought that it is reasonable that he"—
the consumer�ž
should be able to decide not at the time of entering into the contract, when the arbitration provision itself may be part of the small print, but when a dispute or difference has arisen between him and the supplier. At that stage he should be free to elect what he wants to do. That I regard as a fundamental principle."—[Official Report, House of Lords, 20th June 1977; Vol. 385, c. 29.]
I find that astonishing. Surely the fundamental principle is that a bargain made should be a bargain kept. Yet the Lord Chancellor advocates that, after the service has been provided on certain terms which were implicit in the original contract, the consumer should nevertheless be able to override those terms.
That goes too far. It opens up the opportunity, in the concept of contract, to the consumer afterwards to break an agreement that he has made when he finds that it suits his particular circumstances to do so. It seems to me to go beyond both common law and commonsense. The hon. Member for Peterborough (Mr. Ward) acknowledged that arbitration can now be both easy and inexpensive, and we are at one with him in welcoming the action of the Director of Fair Trading in negotiating a code of conduct with different trade bodies in order that a choice should be given to the consumer as to whether he goes to arbitration or to the courts. But if arbitration is a reasonable process and can be commended and it is part of a contract, it should be upheld by the consumer.

Mr. John Fraser: The hon. Gentleman will recall the debate on Report. He is contemplating an arbitration clause that is reasonable. I do not think it is asserted that one should have an arbitration clause that is unreasonable. The problem discussed on Report was the difficulty that, if one makes an arbitration clause subject to "reasonableness", there is great difficulty in either the consumer or the supplier being certain as to the form in which he can properly start his action. If he went to court to test the reasonableness of the arbitration provision, and if the court held that it was reasonable, he would have to go to arbitration. It would be no solution

to test the reasonableness of the arbitration clause in such circumstances. Therefore, the only way out was to give the consumer the choice between arbitration and the courts.

Mr. Neubert: I recall that debate. It should be made clear that the amendment relates only to consumer agreements and not to contracts of business. Nevertheless, in view of the all-round opinion that arbitration is a reasonable condition, a process to be welcomed, and has been facilitated in recent years by county court procedures, it does not seem necessary, in order to protect the consumer, to make it open to him to go against what was perhaps implicit in the original agreement, even though it may be in small print.
A different way of tackling not only the question of arbitration but the terms and conditions of contract is that of prior validation. This received consideration in the House of Lords but was turned down by the Lord Chancellor, as it had already been turned down by the Law Commission.
In the Committee stage in the other place on 20th June, the Lord Chancellor had this to say on the question of validating terms and conditions in advance:
The Law Commission in their Second Report considered prior validation and decided against it, I think rightly. They took the view that it would be cumbersome and costly to administer, and that it could give rise to injustice because it would be confined to generalities, whereas of course the court would look at the facts and the specific circumstances of each case that came before it. My advice to the Committee is: Let us give the Bill a chance first. The disadvantages of a system of validation seem to me to outweight its advantages, and I cannot really think of a situation where one would willingly introduce it."—[0fficial Report, House of Lords, 20th June 1977; Vol. 384, c. 483.]
Although he acknowledged a moment later that the idea was interesting, he did not give it his support, although the Law Commission had left the matter open and had not come to a firm conclusion on the point.
Hon. Members in this House and Members in the other place have expressed concern that this issue might give rise not only to increased expense but to an increase in litigation. They were anxious to avoid that. It was thought entirely reasonable that either through the Office of Fair


Trading or through the Restrictive Practices Court agreement should be established in advance of what was a reasonable standard term of contract to save a good deal of dispute and legal activitiy and expense afterwards.
I believe that there are intimations that in Europe the people concerned are coming round to this point of view. The hon. Member for Peterborough will remember that he cited as justification for changing the name of the Bill the fact that events were moving towards this concept in Europe. It is interesting to find here that this is one of the points that our European colleagues are considering.
The objectives of the Bill are in accordance with the terms of Resolution 76/47 on unfair terms and consumer contracts. The system of control proposed by the Bill—that is to say, reasonableness judged with regard to the circumstances which were or ought reasonably to have been known to or in the contemplation of the parties when the contract was made; that is, under Clause 10—is wholly contrary to the system of control advocated by that resolution, which proposed among other things prior validation.
There seems to be some understanding that the European Commission has produced a draft of a directive concerning standard terms and consumer contracts which envisages a similar system of prior validation. The Lord Chancellor cited the disadvantages, as he saw them, of going over to a system of prior validation, but there are some very real advantages to which I wish to draw the attention of both the Minister and the sponsor of the Bill.
First, it would provide an element of certainty for consumers and providers of services. For example, on the point of arbitration, it can be a common feature of contracts—and it is now—that it can be established by this procedure that such a provision was reasonable and that there would be no need either to give the consumer a choice or to test it in the courts. Another advantage would be uniform application and the same decisions by differing courts. Finally, scope would be given under exemption clauses as a result of give and take by providers of services and consumer associations or other users' associations. This would certainly be better than the all-or-nothing

judgment that the courts themselves would tend to give.
Not having such a system of prior validation would seem to involve these disadvantages. First, we should be out of step with the rest of Europe. We should be delaying harmonisation in a field in which harmonisation is obviously very relevant. The first case that went to litigation for each form of standard term—there are many of them, not just arbitration, and there are many other standard forms of contract—might well be taken by the provider of those services to the House of Lords at great expense to all to determine the reasonableness of a particular term. That could happen to each clause in the standard term contract. There could be greater uncertainty until a decision was taken, because the decisions could be decisions of the county courts, which receive little publicity, and those decisions would probably not be known to consumers or other users.
For all these reasons, I ask the Minister of State to consider whether, in the provisions of such a feature as an arbitration clause in a consumer contract, it would not be preferable to adopt a system of prior validation. The Office of Fair Trading is agreeable to this procedure, if we can judge by its previous activities in this area. The matter should not be dismissed as cursorily as has been the case here and in the other place.

5.45 p.m.

Mr. Moate: My hon. Friend the Member for Romford (Mr. Neubert) was right to express his concern about the way in which the Bill has been developing. I add to that my concern about the way we are dealing with what seems to be a far-reaching change in the law. In years to come we shall, perhaps, rue many of the consequences of this legislation. I can understand its good intentions. This amendment is no doubt part of those good intentions. I can see a case for restricting some of the unreasonable terms and conditions that sometimes appear in the small print. But by this amendment and by other matters which we are considering we are, perhaps, undermining the value of contracts and, to a certain extent, removing some protection from the consumer.
We shall not fully understand the implications of these changes in the law for


many years to come. I believe, however, that we may get greater uncertainty in contracts, perhaps over-insurance by suppliers of goods against the possibility of liability, thereby increasing prices. People will be seeking to protect themselves from eventualities and risks which they have not yet foreseen. This amendment is a case in point. I am no lawyer, and it is not always easy to follow the earlier proceedings. I was not convinced, by my reading of the debates in another place, of the merits of this amendment. I thought that strong arguments were put up against it.
The first assumption that puzzles me is that an arbitration clause in a contract is somehow an imposition upon the consumer. No doubt hon. Members will correct me if I am wrong, but it had seemed to me that the general intention of including such a clause was to provide a sensible mechanism which would enable the consumer to settle a dispute. I would have thought that that was a desirable feature in most agreements.
The Minister said that there were some unreasonable arbitration clauses. I would not dispute that. If he says so, I am sure that he has evidence of that. He should find means of dealing with this as a separate issue, perhaps even applying the test of reasonableness in some way. I do not think that it is right to say, in effect, that arbitration conditions can be overridden, which is what the amendment seeks to say. It would mean that there would be no merit in including an arbitration clause in a contract. It would have no validity until after differences had arisen. That would mean that any supplier might as well wipe the clause out of the contract. Surely that is not to the benefit of the consumer. It is to his disadvantage.
There seems to be a strong argument against the amendment. I am concerned generally, too, because there seems to be a strong case for increasing arbitration at the expense of litigation. That appears to be a desirable trend and I understood that it was the trend in all our legislation. Here, however, we have an amendment to a significant piece of legislation which sems to undermine that principle. It is reducing the value of arbitration and nullifying the arbitration clause, which more often than not

has been inserted into a contract for the benefit of the consumer.
I very much hope that the hon. Member for Peterborough (Mr. Ward) will not press the amendment. Perhaps we have no choice. In that case, I hope that the House wil reject it and I hope that their Lordships will accept our point of view that this is an undesirable proposition.

Mr. Neubert: Before my hon. Friend sits down, I would point out to him that their Lordships were never given a chance to come to a decision on this point. The view that my hon. Friend and I have expressed was also expressed by Lord Hailsham and Lord Denning, Master of the Rolls. We are not lawyers and we would be unwise to engage a Minister who is across the Dispatch Box. However, there is a considerable weight of opinion in favour of what my hon. Friend has stated.

Mr. Anthony Grant: Having listened to my hon. Friends the Members for Romford (Mr. Neubert) and Faversham (Mr. Moate) I am convinced that this is an undesirable amendment. The hon. Member for Peterborough (Mr. Ward) would be well advised to take it away not only for the reasons given by my hon. Friends but because of the remarks made by Lord Hailsham and, indeed, Lord Denning, to whom we give considerable deferment on all legal matters.
I would make only one point. It is to some extent an illusion to imagine, even in this day and age, that arbitrations are necessarily automatically quicker and cheaper than appeals to the court. Certainly, since the time that I was involved in the law, the procedures of the courts have speeded up considerably.
I know of many cases in which arbitration has been an untold and fantastic expense. Often it produces a result that is thoroughly unsatisfactory to both sides. In opposing the amendment I suggest that it is far better to leave the matter entirely to the parties to the bargain and to let them decide. I very much hope that the hon. Gentleman will not press the amendment.

Mr. Ward: My hon. Friend the Minister may wish to reply to the points made by the hon. Member for Romford (Mr. Neubert) on the question of prior validation. However, reading the debates in


the other place, particularly the remarks of Lord Denning, it is fair to say that Lord Denning and even Lord Hailsham might have felt that the Bill as drafted would deprive people of opportunities for arbitration. But, in fact, the proposal is that choice should be extended.
I am surprised that Conservative Members should be prepared to see the choice of consumers limited. Bearing in mind the development of the small claims court, for example, and the fact that very small value claims can conveniently be taken to another form of arbitration that has been created, this proposal might lend itself to the consumer as being more convenient to him. The consumer might live near the courthouse, and so on.

Mr. Moate: Is it not the case that if there is no arbitration clause the supplier of goods has the advantage thereafter, because he does not give the option to the consumer? That is to the advantage of the supplier, who can say to the consumer "Take me to court", and because there is no arbitration provision the consumer has to go to law to get redress. Most consumers would be reluctant to go to that length. This therefore reduces choice rather than extends it.

Mr. Ward: That is a matter of opinion, for the House to judge. I have had no representations on that point from any particular group. Bearing in mind the fact that the Director General of Fair Trading is incorporating provisions of this kind generally in the codes of conduct that are now being negotiated in various industrial groups, I think that it is logical and sensible that the amendment now proposed by their Lordships should be adopted for the purposes of the Bill.
I know that the hon. Member for Romford is interested in the work of the travel industry and ABTA. I am advised that the code of conduct that the Director General of Fair Trading negotiated with ABTA members follows the Bill and that arbitration is offered to the consumer only after the dispute has arisen. I hope that hon. Members will see the amendment as offering maximum choice to the consumer and nothing else.

Mr. John Fraser: I had not given much thought to the prior validation point, which had not been raised before.

It raises many problems about freedom of contract if a clause in a contract is to be validated by some authority—I assume a State authority—without the parties who must operate that clause both being present when it is validated.
I know that the hon. Member for Romford (Mr. Neubert) is trying to introduce certainty into arbitration clauses but my initial, off-the-cuff reaction is that the matter would need a great deal of thought, and I am not sure that it is an attractive proposition. When a similar amendment was moved on Report by my hon. Friend the Member for Hemel Hempstead (Mr. Corbett) I do not think that any hon. Member on either side of the House demurred from the proposition that unreasonable arbitration clauses should be examined. I then put it to the House that it would be difficult to subject them to a reasonableness test, because that would lead to confusion about the venue—and possibly a double venue. The House accepted my advice and I think generally expressed the wish that the matter should be looked at again by the other place. The other place has provided a method of dealing with consumer arbitration clauses to which no one had raised any objection until this debate.
The consumer has a choice between using the courts and using the arbitration clause. If the arbitration clause is attractive, cheap and speedy and imposes no unreasonable burden upon him, he may choose it. He may choose to go to court if that provides a more reasonable, cheap and speedy way of settling the dispute.
It would be wrong to allow the imposition upon a consumer of an arbitration clause that could be dressed up as an exemption clause or as an obstacle to achieving a settlement of the dispute. It is to deal with that mischief that the clause was introduced, and I hope that the House will accept it.

Question put, That this House doth agree with the Lords in the said amendment: —

The House proceeded to a Division; but no Member being willing to act as. Teller for the Ayes, Mr. DEPUTY SPEAKER declared that the Noes had it.

Question accordingly negatived.

New Clause B

EVASION BY MEANS OF SECONDARY CONTRACT

Lords amendment: No. 11, in page 5, line 28, at end insert—
B. A person is not bound by any contract term prejudicing or taking away rights of his which arise under, or in connection with the performance of, another contract, so far as those rights extend to the enforcement of another's liability which this Part of this Act prevents that other from excluding or restricting.

6.0 p.m.

Mr. Ward: I beg to move, That this House doth agree with the Lords in the said amendment.?

Mr. Deputy Speaker (Mr. Oscar Murton): With this we may take Lords Amendment No. 39.

Mr. Ward: The point with which the amendment deals is a very narrow and technical one. I appreciate that the Bill in part is drafted in fairly complicated language, but that is unavoidable if we are to frustrate a highly technical form of evasion, which was described by my noble Friend Lord Jacques in the other place on Report.
The example given in the other place was that of the installation of a central heating system in a shop by a company whose subsidiary contracted with the shopkeeper to service the installation and to put right any defect in the system caused by the parent company, but where the service contract required the shopkeeper to agree not to bring any action against the parent company, the installer of the system, in respect of defects and provided that if the shopkeeper brought an action against the installer the service company would be required to indemnify the installer.
For example, if the boiler were to explode due to negligence and the shop were damaged and the shopkeeper brought an action against the installer, the installer would be entitled to enforce indemnity against the service company, which would be entitled to sue the shopkeeper for breach of contract and recover as damages the amount it had to pay to the installer under the indemnity.
The point made as to the possibility of a tricky, three-cornered contractual

situation engineered to the detriment of the consumer by companies getting together and cooking up a situation of this kind is perhaps rather unusual. It was not introduced by myself or by other people; it came directly from the Law Commission. We should take the Law Commission's advice on this point and build into the Bill the safeguard proposed by the noble Lords.

Question put and agreed to.

Clause 10

THE "REASONABLENESS" TEST

Lords amendment: No. 12, in page 6, line 5, at end insert:
(3A) Where by reference to a contract term or notice a person seeks to restrict liability to a specified sum of money, and the question arises (under this or any other Act) whether the term or notice satisfies the requirement of reasonableness, regard shall be had in particular (but without prejudice to subsection (2) above in the case of contract terms) to—

(a)the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and
(b)how far it was open to him to cover himself by insurance."

Mr. Robert Taylor: I beg to move, as an amendment to the Lords amendment, in paragraph (a), after 'which' insert:
'in the course of his business'.

Mr. Deputy Speaker: With this we shall also take the second amendment to the Lords amendment, in paragraph (b), after 'him' insert:
'in the course of his business',
and Lords Amendment No. 42.

Mr. Taylor: My reasons for tabling the amendments are that, not being a lawyer and by no means an expert on the law of contract, I have considerable apprehensions about the possible consequences of the Lords amendment unless it is amended in accordance with my suggestions.
I appreciate the reasoning that promoted the passing of Amendment No. 12 in the Lords. It was thought that further protection should be given to professional and business men who cannot be protected by limited liability. I am sure that that motive gains the approval of all in the House. There is, however, a widely held belief, which has caused considerable


alarm in many professional institutions, that the amendment could have a contrary effect.
The amendment seems to provide that where any person—which includes a company or a partnership—seeks to restrict his liability by contract to a specified sum, the court, in deciding whether the restriction is reasonable—and that is an important word—shall have particular regard, first, to the resources that he can expect to have available to him in the process of meeting that liability, and secondly, how far it was open to that person to cover himself by insurance.
I am not a lawyer, but, as I understand it, the test of reasonableness involves a question of all or nothing. If the exemption clause is reasonable the plaintiff gets away with nothing, whereas if it is unreasonable he recovers his losses. That means that if the defendant is a company, individual or partnership, or a member of a partnership, he is fully liable for all the plaintiff's losses, irrespective of his ability to obtain insurance cover.
In the new proposal the court must take into account the resources available to the person involved. How will the court assess the resources in a partnership where one member is considerably more affluent than the others? If the resources of the affluent partner are taken into account the other members of the partnership will be made bankrupt. If the court considers the resources of the weakest partner, with fewest assets, the wealthy partners will escape with a small liability. If the words of my amendment are accepted the original intention of Amendment No. 12 will be met.
My other argument is equally important. I understand that there can be no halfway decision about reasonableness. That is my understanding as a layman. Under this provision, therefore, if the courts have to examine the resources that individuals or companies have available and they do not meet the liability in full, the case must be thrown out, because of the provision of reasonableness
.
I take an example that has been quoted elsewhere. If there is a liability for £100,000 and a company is faced with paying that sum when its assets are only £95,000, the case will be rejected because of the inadequacy of the assets. On the other hand, if the company has net assets

of£105,000, it will be liable. Those are the facts as reported in the Press.
Finally, although the inclusion in the Bill of a reference to the availability of insurance cover has been welcomed very widely, the wording of paragraph (b) in the new subsection is not really satisfactory. It would have been much better if reference had been made to the respective abilities of the parties to insure, because there are instances where a party who controls the situation has access to information that will enable him to get insurance on favourable terms, whereas others without that information may be less favourably placed.

Mr. Deputy Speaker: Lords Amendment No. 12—in paragraph (a), after "which", insert
in the course of his business".
The Question is, That the amendment be made.

Mr. Ward: I should like to make a brief comment before my right hon. and learned Friend the Lord Advocate and my hon. Friend the Minister of State come in further on this point. The amendment came through the good offices of the Lord Hailsham. I listened very carefully to what the hon. Member for Croydon, North-West (Mr. Taylor) said. It seems that what he is proposing undermines completely the intention of the clause. A businessman could so arrange his affairs that he would divest himself of assets held for the purposes of his business and so escape the intention of the clause. I shall have to listen very carefully to what is said by my hon. Friend the Minister. At present, however, I feel inclined to resist the hon. Gentleman's proposal.

Mr. Moate: On a point of Order, Mr. Deputy Speaker. May we know whether the hon. Member for Peterborough (Mr. Ward) was speaking to the amendment?

Mr. Deputy Speaker: I understand that the hon. Member for Peterborough (Mr. Ward) was speaking to the first of the two amendments—paragraph (a). The amendment that I proposed was in paragraph (a), after the word "which" to insert the words
in the course of his business".

The Question is, That the amendment be made.

Mr. John Fraser: Perhaps I may deal with the example given by my parliamentary neighbour, the hon. Member for Croydon, North-West (Mr. Taylor), about the company. I think he said this: possible claim of £100,000, if they had assets of only £95,000—exemption reasonable; if they had assets of £105,000—exemption unreasonable. That is the Micawberesque example of how the hon. Gentleman thought it would work. I would not contemplate an examination of resources resulting in that kind of judgment. I think it is far too easy an example. It is far too brash a conclusion that the courts would work like that.
Perhaps I may give a rather more practical example. If a dry cleaner with fairly limited assets, both personal and in his business, wanted to impose a limitation of liability for the damage resulting from the cleaning of a fur coat, that, for the small business, might well be reasonable. Indeed, it might be reasonable for a large business as well. One would have to take into consideration all the facts. The example that the hon. Member gave is too easy an example.
The second point is that if one takes into account only the resources that the person has in the business, that could lead to keeping assets out of the business simply to avoid liability. Again, I turn to the example of the solicitor. At present, solicitors are entirely liable for their negligence without any limit of liability at all. Of course, they wisely insure for it. If, however, they were found liable for negligence, the partners would jointly and severally be liable not only for their business assets but for their entire personal fortunes as a consequence of their failure to advise properly, even if it were the fault of only one of the partners. That is a fairly hard rule, but it has existed for a long time for the benefit of the public.
If, however, one erodes the idea that the personal assets of the business man are not to be taken into account, it immediately invites a situation in which a person puts as few of his assets as he can into the business and milks it as much as possible and keeps all that he can in his personal account. That raises a real difficulty.
It is for that reason that I think that the very big concession to business men put forward by Lord Hailsham in the

other place gets the matter about right. It deals with both insurance and assets. It goes a long way to help those who are worried about incurring large liabilities and who, quite properly, think that it would be reasonable to introduce a limitation. The Lords amendment is a considerable concession, and I very much welcome it. If one goes further, one provides an incentive for evasion of proper liability. For that reason, I hope that the hon. Member's proposal will not be accepted.

6.15 p.m.

Mr. Robert Taylor: Let us consider the situation as it affects architects. If there is a fire in a building which has recently been constructed and lives are lost, the damages could be enormous and amount to considerably more than the liability of a solicitor. The Bill as framed would be a great disincentive to many professional practices to undertake the risks without making sure that the liability of any individual partner was not substantially more than the liability of the other partners.

Mr. Fraser: I have to tell the hon. Gentleman that in that case his amendment would not help, because that would be a liability for death or personal injuries, and in no circumstances can liability be avoided under the Bill. The hon. Gentleman's amendment would not deal with that. In practice, architects would insure.

Mr. Deputy Speaker: I think I should inform the House that with the two amendments to the Lords amendment it is in order to discuss the main Lords amendment.

Mr. Anthony Grant: I think that my hon. Friend the Member for Croydon, North-West (Mr. Taylor) has made the case very fully, but I am sure he would be the first to acknowledge that much of his lucid speech was derived from a remarkable letter writen by Mr Tony Samuelson to the Financial Times after following this legisaltion closely both here and in the Lords. He is a business man running a successful business. One of his partners is a constituent of mine, and they are profoundly concerned about the effect that the Bill will have upon their business. What my hon. Friend said echoes precisely the point made by Mr. Samuelson in his letter.
I shall not go over the points that both my hon. Friend and Mr. Samuelson have made, but I recall that one point made by Mr. Samuelson was that rather than be fettered with the wording which the Lord Chancellor has sought to introduce, with the best will in the world and with the intention of helping industry, the courts would prefer the original wording whereby they could consider all the circumstances. I should like the Minister to comment on whether the courts have not an even wider remit and are able to consider the matter more fully without this wording being inserted.
If we are to have the Lords amendment, I think that it is reasonable, as my hon. Friend said, that it should be confined to operating
in the course of his business".
I know the difference between companies and professional men, but the whole effect of the Bill will be that, because of the burden imposed upon industry and commerce, many devices will be introduced to get round this provision. I can envisage people in a particularly vulnerable industry seeking to operate through separate companies which have small assets.

Mr. John Fraser: It was the hon. Gentleman who piloted through the House the 1973 Bill, which, quite rightly, did not provide exemption in the case of the sale of goods. It covered damage to property and damages for death or personal injury. That measure has been received with equanimity by industry. Why does the hon. Gentleman think that it will have a calamitous effect when it is applied to services?

Mr. Grant: I thought I had made clear in an earlier speech that it was a concern of one industry in particular, the alarm industry. That industry avoided the full rigours of the 1973 Act by going in for the rental system and was, therefore, without the 1973 Act. Because it is particularly vulnerable in this respect, that industry is particularly concerned about this legislation. We may find that, unless we restrict liability in some way on these lines, other devices may have to be found to evade liability. Several industries such as the alarm industry will find themselves so heavily oppressed that the only consequence will be less competition, less

service and, eventually, higher prices. That is only one example of which I know, and there may be others.
We shall try to get ourselves insured before 20th November or whatever the date is, but I have my doubts. I have no doubt that the considerable costs will eventually be passed to the consumer. I hope that the Minister will accept the amendment, which would ease the position of one industry that I know.

Mr. Moate: The amendment moved by my hon. Friend the Member for Croydon, North-West (Mr. Taylor) has some merit, although I do not think that it goes very far towards making a bad Lords amendment much better. If we are trying to relieve the problem of those exposed to unlimited liability as members of a partnership it is easy to argue, as the Minister has done, that if we allowed this it would enable partners to ensure that their funds were separated from any possibility of being in the business, and to shift money, and so on.
That temptation exists to a far greater degree in other activities. If a partner has accepted the unlimited liability of being in a partnership or an unlimited company in any form it seems most illogical that he should try to hive off his assets or conceal his resources to ensure that certain exclusion clauses in a contract that he issues might be conducted by him in a beneficial way. I think it reasonable to allow a partner in a firm to gain the extra protection suggested in the amendment and I shall support the amendment if the House decides to agree with the Lords amendment.
The Lords amendment itself leaves me rather bemused. It is another amendment with good intentions, but the more one studies it the more one becomes alarmed at the situation that has produced it. It seeks to vary the conditions of reasonableness of the exclusion clause, and so on, that will apply to different contracts. It emphasises the fact that we are undermining a large range of commercial and professional contracts. This worries me immensely. It calls into question the value of the conditions in certain areas of business or the professions in openly negotiated contracts.
Architects have been referred to by my hon. Friend. I am no lawyer. I do not


know the impact of this Bill on the conditions of contract of the Royal Institute of British Architects, but presumably it has some relevance. Are we saying that this provision does or could vary the reasonableness of the conditions imposed in the RIBA conditions of contract? This is called into question.
We then say that we should try to protect the partner in a small firm of architects by saying that he need only remove the unreasonable exclusion clauses if he cannot get insurance because it is not available to him, or if he does not have the resources, or if he has such enormous personal assets that he does not need insurance, because he can stand up well himself.
Again, we have to bring in the question of reasonableness and the availability of insurance cover. I speak as someone with an interest in insurance business. I am not sure that that interest is affected one way or the other by the Bill, but I declare it for what it is worth. Perhaps I have a greater interest as a consumer, in which case I am not particularly entranced by the Bill.
The wording is
how far it was open to him to cover himself by insurance".
What does that mean in legal terms? I hesitate to challenge the legal expert who drafted this amendment.

Mr. John Fraser: It was Lord Hailsham.

Mr. Moate: That is why I hesitate to challenge it. I should hesitate before putting in a phrase such as
how far it was open to him to cover himself by insurance".
What does it mean? Is it referring to the availability of insurance on the market technically and theoretically, or is it referring to his financial resources being sufficient to enable him to buy enough insurance cover?
My hon. Friend the Member for Harrow, Central (Mr. Grant) referred to the possibility of an architect being involved in a fire with subsequent loss of life. The Minister said that the loss of life factor was not relevant, because the architect would be fully liable anyway if negligence were proved in those circumstances.
Let us assume a massive consequential loss of £1 million in the fire. In those circumstances, should the architect be covered for £100,000, £1 million, £5 million or £10 million? It is open to an architect to secure cover up to £10 million. He would have to pay a lot of money for it, but it is possible in theory, No doubt some of the largest practices will insure to that extent. The smallest practices will not. However, the possibility exists of small practices being exposed to massive claims.
How does one interpret the phraseology
how far it was open to him to cover himself by insurance"?
I do not know. It is a dubious phrase. Why introduce a means test? Why should the consumer not know, as between one supplier and another, whether an exclusion clause is reasonable or unreasonable? Surely the consumer is entitled to fairly standard terms from all suppliers.
The Minister referred to a dry-cleaning shop. Is he suggesting that a rich dry-cleaning shop has one set of conditions and a poor dry-cleaning shop has another set of conditions? It is an odd proposition. It will not help the consumer. The Minister has not made the strongest case for this amendment.
I do not want to take up too much of the time of the House. However, I should like to take the example of the man who takes his car to a garage. The availability of insurance cover to the garage owner is of considerable relevance to the Bill. It is a long time since I dealt with garage insurance. In the past it was difficult for most garage owners to secure insurance for vehicles left in the open. Many of them could not get such cover without paying astronomical premiums.
The relevant exclusion clause for garages is "No liability for theft of your vehicle". There have been disputes about that. Many garages have therefore taken a limited form of policy to cover legal liability for theft of vehicles. Of course, negligence has to be proved. It can seldom be proved, so the motorist will not be able to register a claim for loss of his vehicle.
Let us assume that the Bill goes through and that the onus is completely transferred to the garage owner. Hereafter, it will not be necessary to prove negligence.


He will simply have to accept full liability for the vehicle parked on his forecourt.

Mr. John Fraser: The Bill does not interfere with the law of negligence. It does not impose any strict liability where strict liability does not now exist. Therefore, the hon. Gentleman's example would be wrong. The claim by the customer against the garage proprietor would be based on negligence. The Bill does not alter the law of negligence. To give an extreme example, if A is negligent and there is no doubt that his negligence caused B's death, A cannot exempt himself from causing B's demise by his own negligence. The Bill does not deal with the primary creation of the liability.

6.30 p.m.

Mr. Moate: I had moved on from the point about negligence. In the past a garage could rely on the exclusion clause to protect it against the theft of the vehicle, but there was always an overriding common law duty with regard to negligence. I am sure that the Minister would agree that the motorist could always sustain a claim if gross negligence could be proved, and that there was insurance against that. However, the garage owner could no longer rely on that exemption clause and presumably the motorist would have a strong case without proving negligence because there would, in effect, be a contract between him and the garage for the garage to look after his vehicle. If the Bill does not mean that I do not see why it is being introduced at all. Once direct liability has been transferred to the garage owner it will be even harder for him to obtain insurance.

Mr. John Fraser: It is not a transfer of liabilities. At the moment, if a garage proprietor having care of a vehicle leaves it on the frontage of the garage overnight and the car is stolen the proprietor is able to exempt himself from liability and there is no test of reasonableness. In future the proprietor would not be able unreasonably to exempt himself. That is the point.

Mr. Moate: In those circumstances I agree that the situation has not altered, by and large. However, we are discussing the situation in which the garage owner will be less able to protect himself, by

the use of the exclusion clause, against claims from motorists. My point is that we should be applying the test of reasonableness as to the availability of insurance. It should become much easier and cheaper for the motorist to get insurance against such a loss than for the garage owner, who will be increasingly exposed to claims. As a result, insurance for the garage owner will be more expensive and less available.
If the availability of insurance is to be applied as a test between the claimant and the person who has caused the loss it will be fair to apply that test both ways. If it is easier for the motorist to obtain insurance and he does not, that is also a test of negligence. If the courts say that the garage should be properly insured, the garage owners can say that the motorist should also be properly insured. I do not think that the matter has been fully thought out. There are many areas of doubt.
Another example arises with contractors. There are so many insurances that they can and should obtain and that might be extremely costly. Will the court take all those insurances into account and say that because they are available the contractors should have been insured. I do not think that the courts are competent to make such judgments. The amendment makes a bad situation distinctly worse. It should be further examined in depth. This is a bad way of dealing with legal matters that have considerable implications. The amendment is riddled with holes and should be voted down.

Amendment to the Lords amendment agreed to.

Amendment made to the Lords amendment: In paragraph (b), after him' insert
'in the course of his business'.—[Mr. Robert Taylor.]

Lords Amendment No. 12,as amended, agreed to.

Clause 14

SCOPE OF PART II

Lords amendment: No. 13, in page 7, line 13, leave out "and".

The Lord Advocate: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this we may take Lords Amendment No. 14.

The Lord Advocate: The purpose of these amendments to make clear that the validity of any discharge or indemnity accruing in settlement of any claim is not affected by any provision in Part II. This problem arises in the Bill only in respect of the law of Scotland.

Question put and agreed to.

Lords amendment No. 14 agreed to.

Lords amendment No. 15 disagreed to.

Lords amendments Nos. 16 to 19 agreed to.

Lords amendment No. 20 disagreed to.

Lords amendments Nos. 21 and 22 agreed to.

Lords amendment: No. 23, in page 8, line 3, leave out second "or"

The Lord Advocate (Mr. Ronald King Murray): I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this we shall take Lords Amendments Nos. 24 and 25.

The Lord Advocate: These are Scottish enactments, equivalents to the provisions in paragraphs 2 and 3 of Schedule 1.

Question put and agreed to.

Lords Amendments Nos. 24 and 25 agreed to.

Clause 15

LIABILITY FOR BREACH OF DUTY

Lords Amendment No. 26agreed to.

Lords amendment:No. 27, in page 8, line 21, leave out "or" and insert "and".

The Lord Advocate: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this we shall take Lords Amendments Nos. 28, 29, 31, 34, 35, 36, 40, 41, 43 and 47.

The Lord Advocate: These are drafting amendments concerning provisions enacted in Scottish legislation equivalent to those in Schedule 1.

Question put and agreed to.

Lords Amendments Nos. 28 to 32 agreed to.

Lords amendment No. 33 disagreed to.

Lords amendments Nos. 34 to 37 agreed to.

New Clause

CONSEQUENCE OF BREACH

Lords amendment: No. 38, in page 11, line 4, leave out Clause 21 and insert new Clause—
21. For the avoidance of doubt, where any provision of this Part of this Act requires that the incorporation of a term in a contract must be fair and reasonable for that term to have effect—

(a)if that requirement is satisfied, the term may be given effect to notwithstanding that the contract has been terminated in consequence of breach of that contract;
(b)for the term to be given effect to, that requirement must be satisfied even where a party who is entitled to rescind the contract elects not to rescind it."

The Lord Advocate: I beg to move, That this House doth agree with the Lords in the said amendment.
This is a Scottish redraft of provisions equivalent to Clause 9 of the Bill.

Question put and agred to.

Lords Amendments Nos. 39 to 43 agreed to.

Clause 23

INTERPRETATION OF PART II

Lords amendment: No. 44, in page 11,
line 26, leave out "(whether intentional or not)".

The Lord Advocate: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker: With this we may also take Lords Amendment No. 45.

The Lord Advocate: These amendments are a redraft to ensure that vicarious liability applies to breach of duty or breach of obligation.

Question put and agreed to.

Lords Amendments Nos. 45 to 47 agreed to.

Lords Amendment No. 48 disagreed to.

Lords Amendments Nos. 49 to 53 agreed to.

Clause 29

COMMENCEMENT; AMENDMENTS; REPEALS

Lords amendment: No. 54, in page 15, line 13, leave out from "force" to end of line 14 and insert "on 1st February 1978".

Mr. John Fraser: I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Neubert: Since this is almost the last amendment, I shall take the opportunity to make a general comment on the passing of the Bill. I hope that it will not be invoking the wrath of the gods to suggest that the Bill might now be in sight of a safe haven. It has run a hazardous and chequered course which derives almost entirely from the fact that it was subject to the Private Member's Bill procedure. Perhaps it should be taken as an object lesson to the Lord President that a major Government measure should not be introduced in the guise of a Private Member's Bill.
In particular, the Bill has suffered from the outset from the handicap of having had only a formal Second Reading. That meant that many of the most important issues in the Bill were not brought to the attention of those most interested in them until a very much later date. That has been a serious drawback in the procedure.
However, I reaffirm that we welcome the passage of the Bill and support the principle of it. I pay tribute to the Minister for having recognised, in setting the date on which the Bill comes into effect, the difficulties that will be faced in implementing it. It is suggested that the date of implementation is 1st February, and I ask the Minister to confirm it. That date was chosen because of representation by the insurance industry, I believe. The industry asked for a delay of 15 months because of its year-round computer programme. It would have liked a longer period than it now has, but six months will be of greater assistance than three months for almost everyone who is affected by the Bill.
A doubt occurs to me and I should like to have the Minister's advice. Even with a six-months period of implemen-

tation, many brochures and other printed commercial material will contain contracts with exclusion clauses. They will presumably be rendered invalid by the enactment of the Bill. Is there any question of people in that situation being liable at law under the Misrepresentation Act or the Trade Descriptions Act for something on which they may unwittingly mislead their customers due to the Bill having overtaken advance printing of promotional material?

6.45 p.m.

Mr. John Fraser: I can give the assurance that there would be no possible offence of misrepresentation in those circumstances. I think that the hon. Member for Romford (Mr. Neubert) was less than fair to my hon. Friend the Member for Peterborough (Mr. Ward) when he seemed to suggest that he had had a Government Bill foisted on him. Were it not for the persistence of my hon. Friend and that of the Consumers' Association and others outside the House, the Bill would not have gone through in the way that it has done.
We have never disguised the fact that the Government have given generous assistance in the dafting of the Bill and that the parts relating to Scotland were put in by the Government. However, had it not been for my hon. Friend hammering away, the Bill would never have seen the light of day. I want to pay my hon. Friend the Member for Peterborough the most handsome tribute I can. I pay tribute also to those members of my Department who have advised my hon. Friend and have given unstinting assistance to him. There have been others too. This has not been a Bill over which the Government have had their own way.

Mr. Ward: I do not want to detain the House for more than two minutes. I wish to express my thanks to all who have been interested in seeing these Law Commission reports carried into legislation, particularly to those in my hon. Friend's Department. I thank the hon. Member for Romford (Mr. Neubert) and his colleagues too. They have worked assiduously in Committee and have brought to light many aspects of the Bill which were properly considered outside although unfortunately, owing to the procedures of the House, we have not been


able to have full Second and Third Reading debates.
I hope that the House will agree with Lord Denning, who described the Bill as:
one of the most important reforms in our time in our civil law, both of contract and of tort…a great reform.
I am sure the House will feel that the Bill is worth while and that, despite procedural problems, the House has performed its duty

Mr. Anthony Grant: I, too, wish to congratulate the hon. Member for Peterborough (Mr. Ward) on his persistence and the vigour with which he has carried the Bill through. At the same time, I echo what my hon. Friend the Member for Romford (Mr. Neubert) has said—that it ought to have been a Government Bill, introduced by the Government in exactly the same way as was the Supply of Goods (Implied Terms) Act 1973. There is no reason why the Government could not have done that. It might have made the whole procedure rather easier.
I welcome the Bill in principle. I hope that the hon. Member for Peterborough has not suffered a heart attack because of the last-minute excursions and alarms. He must realise that because of the foolish way in which the Government have handled the Bill it might have been killed had it not been for the kindness and the support of some Opposition Members. The Bill represents a major change in the law of contract. As a result, the Government and all those in future Governments—we on the Opposition Benches will be members of such a Government soon—should note that the Bill places a considerable burden on a large section of industry. There may be a great deal of litigation as a result of this.

Question put and agreed to.

Lords Amendments Nos. 55 and 56 agreed to.

Lords Amendment No. 57 disagreed to.

Committee appointed to draw up Reasons to be assigned to the Lords for disagreeing to certain of their amendments to the Bill: Mr. John Fraser, Mr. Graham, Mr. Anthony Grant, Mr. Neubert and Mr. Ward; Three to be the quorum.—[Mr. John Fraser.]

To withdraw immediately.

Reasons for disagreeing to certain of the Lords amendments reported, and agreed to; to be communicated to the Lords.

SLADEBROOK SCHOOL

Motion made, and Question proposed. That this House do now adjourn.—[Mr. Walter Harrison.]

6.50 p.m.

Mr. Laurie Pavitt: I bring to this House, which I regard as the highest forum in the land, my right to redress the gross injustices inflicted upon devoted teachers, pupils and parents at a good school in my constituency—the Sladebrook High School.
In the 20 years that I have served as an hon. Member of this House I can recall no case that has left me with such a furious sense of outrage and grievance as the irresponsible and callous campaign that some newspapers waged in April this year to pillory this school in banner headlines.
My hon. Friend the Minister will recall the tremendous banner headlines in the Daily Express of 13th April In the short time available to me I do not propose to dwell on the very real problems that all schools in London can show, and with which they have some difficulty in coping. What I am surprised about is that any responsible person should use an anonymous letter as the basis for the kind of attack to which this school was subjected.
The school received three such letters, one of which was a fantastic letter from a religious crank in which there were a number of biblical references. I quote:
Have you not asked What is the meaning of this great anger? Deut 29 24. I am twice blessed because twice reviled by lying tongues. Blessed are ye when men shall revile you and persecute you, and say all manner of evil against you falsely. Mat. 5 11.
On the basis of the three letters, of which that was one, we got a campaign mounted by the Press of this country, the vindictiveness of which bore no relation to what really happened at Sladebrook School.
I have the highest praise for the way in which the Brent Education Committee.


and in particular Councillor Leslie Ford, chairman of the governors, stood up to the sudden attack when the Press of this country focused their attention on this school.
We in this House are used to this kind of thing, but when it relates to local conditions and local circumstances it is extremely difficult to cope with the welter of material on television, the radio and in the newspapers. National attention seemed to be focused entirely upon this school.
I make no attempt to sweep past incidents under the carpet any more than the local education authority did. If anythilng, the authority was too scrupulously honest and so, too, focused attention on problems which, when presented to the public, got out of all proportion to the reality of the balance between the problems at the school and the good things that occurred there.
This added fuel to the flames and made it very difficult to cope with the constant indignation showered upon the very good people in my area. The education committee had an in-depth inquiry and produced a full report, which was submitted to my right hon. Friend the Secretary of State. I ought to read a couple of sentences from the letter which my right hon. Friend was kind enough to send me in relation to another submission to her.
My right hon. Friend said:
I am sure that, despite the undoubted problems with which this school has to contend, you will be as pleased as I am to hear the truth about the efforts being made under difficult circumstances. I am sure, therefore, that you will wish to join with me in deploring the sensational and highly inaccurate reporting of the matter in the Press—particularly theDaily Expressarticle on 23rd May which is, I understand, to be the subject of a complaint to the Press Council.
I hope that there will be a better response from the Press Council on this matter than there has been to some of the other complaints of irresponsibility levelled at some national newspapers recently.
Because I am the Member of Parliament for the area, three national newspapers telephoned me when the scandal was fomented to an unnecessary degree. I spent some time on the telephone trying to put the record straight. I had long conversations in which I tried to redress the balance by telling the reporters the good things that I knew about Sladebrook

School. My experience goes back 20 years, before the previous four schools were combined into Slade brook School. I knew the headmaster of what was the Gibbons Road School, Mr. Clarke. The Press did not want to know. Nothing that I said about the good parts of the school got into print, nor did the fact that I had been contacted. The name of another hon. Member appeared, but not the name of the Member of Parliament serving the school in question.
I charge the Press with irresponsibility on that score, as on another issue in the NW2 area of the London Borough of Brent, where the postmen are having a few local difficulties. The BBC, ITN, the radio and the national newspapers have daily reports of what goes on there, with the names of other hon. Members mentioned, but it never mentions my right hon. Friend the Member for Brent, East (Mr. Freeson), whose constituency it is. He has never been approached by the media to be asked what he thinks of what is happening in his constituency. Slade brook School is an example of the same kind of thing. What is wanted by the media is sensationalism. Nothing of value, no news of a constructive kind, is of the least interest to the editors of newspapers.
Between 500 and 600 pupils of the schools visited this place in the first 10 years of my service here. There are fewer school parties now, because of the cost of transport, but I recall that every year from the Gibbons Road School I had a party of 30–60 students who spent a morning going round the House. The Press does not report that kind of thing, although I informed the reporters who approached me.
What inspired me to try to put the record straight was my great privilege, on 9th July, in going with the mayor of my borough to the school's Jubilee celebrations, visiting the exhibition of art and craft work and getting the atmosphere of the school. I know that schools throughout the country are having similar celebrations, but I would claim that Slade brook School put on an exhibition and concert that were second to none in the whole United Kingdom. There was plenty of excitement, with 200 pupils participating and 30 teachers involved. It was entirely extra-curricular work. That kind of thing is not done only in


school time; it means the expenditure of a great deal of time and energy outside school hours. I shall recall that evening as one of the highlights of all the school visits I have ever made. It was exhilarating, and made nonsense of all the criticisms that have been levelled at the school.
I have a multi-ethnic community, with the largest number of immigrants of any hon. Member. We had first the wave of West Indians, followed by the Indians, the Pakistanis and the Ugandans. In one road in my area there are 70 voters by the name of Patel. I am sure that my right hon. Friend and my hon. Friend would have been thrilled to see the Gujerati dance by the girls aged 13 to 14, in their beautiful saris. It was a traditional Indian folk dance. That was followed by a West Indian dance, with all the verve, rhythm and enthusiasm of the Caribbean. The multi-ethnic nature of the youngsters of this school teaches the adults what integration really means, yet this is the school that was called the school of shame.
Let me try to give the House the true picture of Slade brook High School. It is a miracle of progress against almost impossible odds, in an area of social difficulty. It is difficult to retain teachers, because they have to pay high rents or spend a lot of time and expense in traveling. At one time. Slade brook School had 40 probationary teachers. There were 19 staff vacancies at the beginning of this year. Three-quarters of the staff have less than two years' teaching experience. With difficulties of that order, had there been less devotion and less educational know-how, Slade brook School could have collapsed.
Let me turn to the achievements. Between 1972 and 1974, O level passes were up by 34 per cent. and CSE passes were up by 50 per cent. Dealing with the place that the school occupies in the community. in the last five years the children have raised £2,000 for charity. They pioneered the twinning system whereby able-bodied swimmers adopt someone who is physically handicapped and helps in his necessary therapy.
They played a great part in the creation of the Gemini swimming pool, which my right hon. Friend the Secretary of State opened recently. The school was one of

many that contributed to it. I have copies of a first-class magazine, which had contributions reproduced in a very good newspaper, which most of us on the Government Benches read—The Guardian—and which also went out on BBC radio.
There have been two fashion shows recently before packed houses, the proceeds of which were given to His Excellency the Jamaican High Commissioner for educational advance in that Caribbean country.
In sport this year the school gained six Brent championships. Three pupils took part in national athletics, and one gained a gold medal. The school had a table tennis champion, who was chosen at international level. In a recent international competition Slade brook School had one of the few British contestants to beat the almost unflappable Chinese.
I have already mentioned the concert, but it was only one of a series. Slade brook School has had 14 of them. But typical of the value that the school places on its rôle in the community is the fact that at all the dress rehearsals there were packed houses of old-age pensioners to enjoy the show.
This is the school that the whole of the national Press tried to make out as being an impossible blackboard jungle. I could go on for a long time, but does the House wonder that I should feel sick that when such work has been done so freely in and out of school hours by one of the best headmasters I have had the privilege of encountering—Mr. Kenneth Fitt—and a magnificent staff, who know the meaning of teamwork, irresponsible, uneducated and unintelligent people should seek to blow up events at the school into a major scandal.
I cannot, in conclusion, do better than quote a note that the headmaster of the school sent to me when I asked him for his views on the situation. Mr. Fitt said:
The school is a happy, productive and caring body, but it has not lost sight of its educational rôle, however extensive its social and pastoral work may be: the pupils have recognised this by electing to stay into the sixth form in increasing numbers: 72 in 1975, 111 in 1976, and a record number of 200 applications for September 1977. In the face of the criticism the staff and the pupils have remained unshakeable and convinced that a vital job is being done. It is notable that the criticisms have rarely, if ever, come from those who have visited the school and seen its working.


I have visited the school. I have seen it working. I wish that the media would give as much publicity to this debate as it did to the anonymous, ill-informed charges. Although my constituents may read about it if they buy Hansard or their local newspaper, I predict that if one reads The Times, The Daily Telegraph or The Guardian tomorrow there will be no mention that yesterday Slade-brook School was vindicated of criticism. Not one word will appear in the national newspapers.
Slade brook is a good school. It is on the road to becoming one of the truly great schools. It is certainly one of the schools of which parents, pupils and staff can be proud. I certainly am.

7.6 p.m.

The Under-Secretary of State for Education and Science (Miss Margaret Jackson): I am grateful to my hon Friend the Member for Brent, South (Mr. Pavitt) for raising this subject and for speaking so fully and sympathetically about the problems faced by Slade brook School. Like him, I am constantly dismayed by the attention paid in the Press to ill-informed and inaccurate allegations against comprehensive schools in particular. My hon. Friend has given a clear picture of the situation at Slade brook as opposed to that given in the Press.
There is no doubt that the school has faced considerable problems. It draws its pupils from a variety of nationalities, many coming from homes where the native language is not English and needing remedial teaching. It draws its pupils from many backgrounds and from some parents who find it difficult to offer a high level of parental support for their children's education.
When the Brent Education Authority responded to the anonymous allegations against the school by holding an immediate inquiry, it was assured that almost everything alleged was untrue, inaccurate, biased and completely distorted. My hon. Friend has pointed out that some of the problems are caused perhaps by the number of staff who are on probation or who have little teaching experience. The school has had to cope with many problems caused by the area in which it is situated.
I am sorry that the hon. Member for Brent, North (Dr. Boyson) is not in the

Chamber today because I propose to make some remarks about his part in this affair. I do not wish to do so in his absence, but that is out of my control. Even the hon. Member for Brent, North admits that the report by the education authority on the inquiry into the accusations shows that an attempt has been made to solve the problems that were identified, however they were distorted. Considerable headway is being made in tackling the problems. My hon. Friend has highlighted in the best possible way the type of headway and progress that the school is making.
It seems to me that there are a number of lessons that we can draw from this occurrence. My hon. Friend has drawn some of them—for example, the attitude of the Press and, unfortunately, of some politicians. However, the main lesson to be drawn is that schools facing problems such as those faced by Slade brook School and tackling them to the best of their ability with care, conscientiousness and considerable effort on the part of their staffs. are not assisted by the sort of so-called investigation which was mounted in this case by the national Press. They are, in fact, hindered by those who claim, however inaccurately, to be seeking to assist them.
I know that the Brent local authority has special problems in other areas of its authority as well as in the area near Slade brook School. I am aware that Brent intends to ask the Department for special assistance to enable it to make even more speedy progress in helping schools such as Slade brook. It is for this reason that authorities such as Brent are being asked to apply for resources that are being made available by the Government as part of the inner cities aid programme. It also gets Government assistance from the urban programme and Section 11 grant to assist with, for example, the cost of remedial language teaching for non-English-speaking pupils.
I am pleased to inform my hon. Friend that, as a direct consequence of the Chancellor's statement on 15th July, my Department has just informed the Brent Education Authority that a further allocation of £40,000 is now available for minor school improvements at schools in the borough during the current year. Therefore, we wholly recognise the difficulties that the local education authority


and this particular school have faced and are facing, and we recognise the effort that is being put in by those involved—but not, of course, as my hon. Friend has already pointed out, by all those involved.
I think that the final sad but necessary lesson which may be gained from the events that my hon. Friend has described is that all the progress being made in tackling the complex and deep-seated difficulties faced in a school such as Slade-brook can be handicapped and, in a school without such a sound base, even dissipated overnight by irresponsible and sensational publicity of the kind that has unfortunately been aroused in this case.
I am afraid I do not accept that it is enough for those who have made serious criticisms about a particular school and have then found them to be quite unjustified to shrug their shoulders and say that everything that has been done has been done in the public interest. Of course, it is in the public interest for inquiries to be made and for remedial action to be suggested if that is necessary. It is never in the public interest, in my view, for any school to be pilloried in the Press on the basis of anonymous allegations quite clearly prompted by spite or ill will.
The public have a right to know what is happening in education and in schools, including schools such as Slade brook. But, of course, it is the case—and it is a truth known particularly to every teacher and to every politician—that there is more than one way of arousing public opinion and concern and of seeking to have remedial steps taken if necessary. To take the example of this school, it is possible to say that one should consider the severe innate problems that the school is facing and the great efforts being made to overcome them. It is also possible to ask whether enough is being done to help, at the same time as recognising what is being done. It is a quite different matter and a quite different way of arousing public interest to look at the school and say, as was said in this case, that its problems are a scandal.
The anonymous complainant who first opened this case has perhaps appropriately provided the last word on it, as he provided the first. He complains particularly about the actions of the hon. Member for Brent, North in the last letter of the three to which my hon. Friend has referred, saying
I fear my naïveté may well have punished the younger teachers at Slade brook who I am sure deserve all the help that they can get.
This man, who was prepared to make allegations and to make them anonymously nevertheless now sees that the publicity he brought upon the school was harmful and that it was contrary to the needs of the school, which were for even greater assistance.
I find it very hard to believe that the hon. Member for Brent, North, with all the expertise that he possesses in education and politics, was incapable of seeing what this man now sees. In fact, I go further and say that I believe that the hon. Gentleman saw it but was guilty, as so often before, of exploiting an issue for his own benefit and to gain publicity for himself.
Having studied very closely the report first made anonymously on Slade brook, having studied the report of the inquiry produced by the Brent Education Authority, having looked at reports from my own inspectors and at comment on the school, and having listened to my hon. Friend today, I feel forced to say that the behaviour of the hon. Member for Brent, North in this matter was disgraceful and that he owes the school an apology for inflicting further burdens upon it in addition to those that it is carrying and which it is tackling with such success.
I again thank my hon. Friend for raising this matter. I hope, as he does, that the value of the description that he has given of the work in Slade brook School today will be widely recognised and reported. Unfortunately, like him, I suspect that that may not be the case.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past Seven o'clock